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How to pay off your home loan quicker and save tens of thousands

Bear Loan Saving

We spend most of our lives working just to pay off our homes. Reducing the term of your loan isn’t that difficult; there are a few simple things you can do to cut years off your home loan and free yourself from this burden. Here are some of them to help you be mortgage-free sooner in life.

Small extra repayments

One of the best ways to pay off your home loan quicker is to make extra repayments when possible. Depositing lump sums, such as tax refunds or bonuses, will always be advantageous, however it doesn’t always take large amounts to make a considerable difference – regular small cash injections can have a huge impact over the life of a loan.

For example. Let’s say we give an extra $50 a fortnight on a $800,000 loan, with fortnightly repayments at 3.99% interest, that saves you $35,082 of interest over the life of the loan which in turn will save you 1.5 years in the loan term. That’s not bad for only $25 a week.

Switch your payment intervals

Switching your payment structure can also help save years off your home loan, as well as simplifying your finances if you are paid fortnightly.

There are 12 monthly repayments in a year but there are 26 fortnights in a year and 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are basically paying off an extra month per year.

Make sure you have the right loan

You need to make sure your loan allows extra repayments without penalties and will let you pay bonuses or extra payments to reduce the loan principle more quickly, to help you save on interest immediately. An offset account will also be advantageous by using your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.

You can set your mortgage on your investment property to interest-only but make the principle and interest payment equivalent by putting surplus rental income into an offset account to help reduce the monthly interest charged.

Although you may have to pay extra fees for the offset or redraw account, most loans don’t charge these fees now but if your lender does, these may well be lower amounts than the interest saved. Talking to a finance broker like us is the easiest way to work out whether this option is financially sound.

Paying off your home loan faster isn’t difficult, however it does require financial discipline and expertise in ensuring the right loan features are in place. Contact us to help you put goals in place and complete a health check on your current loans.


This information is not to be relied upon without speaking to your finance broker, tax agent and financial adviser.

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