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Can You Make Extra Home Loan Repayments?

It can be a very clever financial strategy to make extra repayments on your home loan. This is so because, investing your extra cash into your home can speed up your loans life cycle, with the added benefit of saving money in the long run. In any case, you must be extra careful to ensure that extra repayments are planned and the right type of loan taken out to allow for them.

Truth is, the extra repayments aren’t just a ‘pat yourself on the back’ moment, this is because every reduction in a loans principal balance reduces the interest paid for the life of the loan as well. Therefore, they are a way to save serious amounts of cash, paying extra repayments can cut a 30 year long term in half and save hundreds of thousands of dollars.

Most people that take out a loan to purchase a property will over the course of their loan period , increase their earning potential. Therefore allowing them the option to pay off more of their home loan as times goes by, but the issue lies with which type of loan will suit you best if you intend to make extra repayments. Some loans allow you to make extra repayments but others may have restrictions.

For example some fixed- rate loans may allow for additional repayment but they may not give you the option to redraw. Limiting your financial freedom.

Make sure your extra repayments are built into your home loan structure if you plan on paying more then your monthly minimum. This will help avoid break fees.

The best thing to do is to sit down with a finance broker and go through all of your future goals regarding your loan and weigh up which options suit your financial status the best. A good broker would get to know your full financial situation and find out what your needs are regarding the loan. Choosing a loan that will allow you to make extra repayments should be a decision made with your other liabilities in mind.

An example is if one of your other debts has a higher interest rate then the smarter thing to do would be to pay that off sooner. Or if you have a debt that is easier to achieve, you could simply wipe off the entire debt to improve cash flow.

Choosing the right loan is an important consideration, if have end up having more pressing financial liabilities and are unable to follow through with making extra repayments then the loan will end up costing you much more on a variable rate loan.

At the end of the day, to be able to facilitate your financial goals, it is the structure of the loan that is important to consider.

Speak to an MFAA Accredited Bear Loans Broker to find a loan that matches your current needs and future plans.


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

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