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How to Pay Off Your Loan Sooner

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As of current there are 10.3 million real estate properties owned in Australia, of which 58.25% of them are unpaid mortgages according to Mozo. That is a total of 6 million homes or other real estate that’s unpaid for. Compare that data with 35% of home mortgage holders who are now at risk because of increasing interest rates.

With that said, it’s no surprise why many mortgage owners want to pay off their home loans sooner. Not only will it mean more security for you and your family, it will also free yourself from repayments and put your money into other assets to increase your wealth.

Here we’ve compiled four steps on how to pay off your loan sooner.

3 Steps To Paying Off Your Mortgage Sooner

  1. Opt for a Refinance at a Lower Rate

One way to pay off your loan faster is looking for another lender who charges less than your current lender. To do this just go to your preferred mortgage broker and ask for a loan comparison product. Tell the Finance Broker that  you are looking to refinance your current home loan with a lower rate than your existing mortgage with better loan features.

Your mortgage broker will then ask for your home loan statement and other necessary documents to complete a borrowing capacity for you. Finance Broker will list down the possible banks and lenders who can offer you a lower rate. For example, if your current mortgage loan is at a higher interest rate, your broker may be able to find rates at a lower interest rate which will lower your monthly repayments and help you pay off your loans faster.

One smart way to make extra repayments to your new loan. and pay your home loan weekly

  1. Do Extra Repayment

As we discussed the difference in a lower rate, now let’s talk about extra repayments. It is important to review your loan contract if it allows for adding extra money to your monthly repayments. Talk to your mortgage broker if you are unsure how to check.

Now let’s take the same loan in the above example, a $400,000 loan at 8.14% and you’re currently 5 years in the loan term. An extra repayment of $50 per month will save you $31,328.38 interest and lessens your time by 1 year, 3 months.

Now take the same $50 and let’s say you do extra repayments fortnightly. You’ll save $62,800.97 in interest and 2 years, 8 months in time. If you can squeeze that same $50 on your weekly budget you’d save $110,187.42 in interest and 4 years, 30 weeks in repayment time. 

Should you wish to learn how much you can save with extra repayments try our FREE  Extra Repayment Calculator.

  1. Opt for an Offset Loan Type or a Redraw Loan 

An Offset Home Loan is a type of loan that uses a bank saving account to offset your mortgage. You still have complete control over the linked bank saving account including the funds in the account. A Redraw Loan on the other hand is similar concept however the funds will be inside the loan account. 

If the mortgage you are paying is for a residential home that you currently live in then an offset and redraw will work the same for you. If it is for an investment property, then you can only choose an Offset facility for tax purposes (check with your accountant).

For a primary home mortgage, you have the option of going for either a redraw or an offset mortgage. Either which you choose will still save you money and allow you to repay your mortgage sooner and allow you to have emergency money. 

In Summary

To get a preview of your offset mortgage savings try our FREE  Home Loan Offset calculator.

Paying off your loan sooner is not an impossible feat. Refinancing your loan to a lower rate, making weekly loan repayments, adding extra repayments each week, and opting for an offset or redraw loan will save you both time and money. You just need the advice and help from a trustworthy mortgage broker. 

With a paid off mortgage you have more financial freedom to do the things you love in life. Start your mortgage free journey today!

If you have any questions with today’s article or are looking for a reliable mortgage broker near you, get in touch with us at info@excellencefinance.com.au. Or, give us a  call here (02) 96094655​, our Excellence Finance Mortgage Brokers would be more  than happy to lend you a hand.

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