After buying your home, your next financial goal will usually be to pay off your mortgage. This takes different people different amounts of time depending on their circumstances, but there are several things you can do to pay off your home loan quicker.
Here are some tips for becoming debt-free as fast as possible.
Tip 1: Choose a home loan loan with the lowest comparison rate
With interest rates at an all-time low, there’s no better time to take action. There are heaps of lenders competing against each other and vying for your home loan business, so it’s a good idea to compare different rates.
You need to compare loan features and find similar loans before choosing the one with the lowest comparison rate. The comparison rate includes the interest rate plus the cost of any loan fees.
Tip 2: Make larger repayments
One of the simplest ways to pay off your mortgage faster is to increase your regular repayment amount.
Adding even just a few extra dollars can help shorten the length of your loan and save you money. That’s because anything extra that you repay reduces the amount of interest you have to pay over time.
Tip 3: Deposit lump sum payments
If you’ve just come into a large sum of money, such as a tax refund, a work bonus or through selling an asset, consider putting these funds into your loan.
Every little bit helps, and diverting these funds could make a huge difference over time.
Tip 4: Change your monthly repayments to fortnightly
Simply divide your monthly repayment by 2 and repay it fortnightly instead. You’ll end up making an extra monthly repayment each year without even noticing it. That’s because there are 26 fortnights a year and only 12 months.
Tip 5: Create an offset account
An offset account is essentially a savings account that’s connected to your home loan. The value of the money in your offset account is deducted from your home loan balance (with the interest calculated on the difference).
This can be a great way to save money, as you’re likely to save more in home loan interest than you’d earn on a regular savings account.
Tip 6: Avoid interest-only loans
When you choose an interest-only loan, it means that you will only pay interest for a set period of time. This option allows you to make lower repayments and retain more liquidity, but it won’t help you to pay off your mortgage quicker.
Once the interest-only period ends, you will still need to repay the full amount you borrowed. This could mean paying thousands of additional dollars in interest.
If you’re thinking of buying a home, our experienced and licensed brokers at Wisebuy Investment Group can help you to find the right loan for your needs.
We service a diverse range of clients in Newcastle, Lake Macquarie, Port Stephens, the Hunter Valley and the Central Coast.
Contact us today for an obligation-free chat!