Taking out a home loan is a major financial commitment, and represents years of careful planning and money management in the hope of one day reaching the dream of paying it off.
However, as with most forms of personal loans, how long it takes you to work off that debt all depends on the effort you're willing to make. If you adopt some smart strategies, you can easily cut years off your mortgage and get it off your back much faster!
Here at BOQ, we're here to support you from the very early stages of securing finance, all the way through to that final payment. That's why we've put together our top tips on how to pay off your home loan sooner!
1. Make the most of your finances
Many people don't realise that if you make the most of all your sources of funding, such as your savings account and wages, you can go some way toward paying off your home loan more quickly.
One of the easiest ways you can combine your funds to streamline your mortgage repayments is by taking out an offset account. These accounts link your home loan to your normal savings account so that any money that would otherwise be sitting idly in your savings will actually be working to reduce the interest you pay on your loan.
You can also arrange for your income to be deposited straight into your offset account to reduce your interest even further.
2. Settle your fees up
While most banks are happy to let you work your mortgage charges and fees into the loan itself instead of having you pay them up front, you should consider whether it might be better in the long run to settle them early on.
Simply put, the more you add onto your loan principal, the more you have to pay off and the more interest you'll incur. Get these fees out of the way at the start so you have one less thing to worry about!
3. Pay more often
By simply tweaking your repayment schedule so you make more frequent repayments, you can expect to shorten the life of your loan in the long run.
Instead of paying monthly, you can try switching to fortnightly repayments. The logic behind this is based on some simple mathematics - as there are 26 fortnights in a year as opposed to 12 months, you'll essentially be paying 13 months' worth of repayments every year. An extra month may not sound like much of a difference, but you're likely to shave significant time off your loan as the years go by.
4. Consolidate your debt
If you have a range of loans in addition to your mortgage, for example a car loan or credit cards, a sensible tactic is to consolidate all your debts under your home loan.
This is because the interest rate for your home loan is likely to be much lower than for these other loans, so it makes sense to pay off all your loans at the lowest possible rate. Doing so will also help keep you protected if interest rates start to rise across the board, as you'll still be paying off your debts at the rate of your home loan.
5. Tighten your budget
Sometimes it's the littlest things that can make the most difference.
One of the first things you need to realise when taking out a home loan is that with a bit of patience and persistence, you can take small but significant steps towards reducing the time needed to work off the loan. That means being disciplined with your everyday spending and limiting your spending on luxuries, even if you're not completely eliminating them.
Saving a few dollars every day can really add up in the long run and help to cut down your loan.
If you're looking to discuss your home loan options, head into your local BOQ branch and speak to one of our home lending specialists today - we're here to help!