For most people, a house will be the most significant purchase they make, resulting in many years of paying a home loan. So, we’re not surprised if you want to pay yours off as soon as possible. Doing this saves money in interest and relieves the financial burden of the debt. If you’re dreaming of owning your home outright sooner rather than later, here are six ways to help you get there.
1. Make weekly or fortnightly repayments
If you can, make your repayments either weekly or fortnightly, instead of monthly. If you pay fortnightly, you’ll be making 26 repayments in a year, which is equivalent to 13 monthly repayments. This means you’ll be paying one month’s worth of extra repayments each year.
At People’s Choice, we have flexible repayment frequencies on all our home loans, so you can choose to pay weekly, fortnightly or monthly.
2. Make extra repayments
By making extra repayments, either regularly or as lump sums, you’re paying off your home loan faster by shortening your loan term, and in turn reducing the amount of interest you pay. Consider putting unexpected extra funds straight into your home loan, such as a work bonus, your tax refund, or a birthday gift.
Make sure your loan allows you to make extra repayments, so you don’t incur a fee. At People’s Choice, you can enjoy the freedom of making unlimited extra repayments on our variable home loans. With our fixed loans, you can make extra repayments of up to $10,000 a year. Compare them using our comparison tool.
See how much you could save with our extra repayments calculator.
3. Make higher repayments
Instead of only making your minimum repayments, increase the regular amount you’re paying. Even a slight increase can make a difference and help you pay off your home loan faster. If interest rates drop and your minimum repayment decreases, keep your regular repayment at this higher amount if you can.
Remember, this counts as paying extra on your loan, so make sure you’re able to do this without incurring any fees and don’t go over any capped limits.
4. Use an offset account or redraw facility
What is an offset account?
An offset account is a separate bank account such as a transaction account, that you can link to your home loan. The money you have in this bank account offsets the amount of interest you’re charged on your home loan. For example, if you have $20,000 in your offset account and your home loan is $400,000, you’ll only be charged interest on $380,000.
What is a redraw facility?
A redraw facility is a feature attached to a home loan which can also help reduce the amount of interest you pay. It allows you access to extra repayments you’ve made on your loan, which can be helpful if you need to withdraw some of the extra money you’ve paid. At People’s Choice, a redraw facility is available on all our variable home loans.
5. Pay principal and interest
When you’re paying off a home loan, you can choose to pay interest-only for a fixed amount of time, or pay back the principal and interest. Paying principal and interest means you’re paying off the amount you’ve borrowed (principal), as well as your interest. That way, you’re paying off your debt.
6. Keep reviewing your home loan
Although it’s a long-term debt, your home loan isn’t something you should set-and-forget. As circumstances change, it’s important to make sure your it continues to work for you.
Interest rates impact how much you’re paying in home loan repayments. Whether you’re on a variable or fixed rate, or you’ve got a split loan, consider if it’s still the best option for you. If you’re wanting to change your interest rate, you might be able to refinance to a new loan with a better rate. Make sure you won’t incur any fees or break costs by doing so. For more information on interest rates and home loans, check out our tips on how to choose a home loan.
Are you looking to refinance to People’s Choice? Check out our refinance calculator to see how much you could save.