House Loan

Paying more off a house loan or home loan early can potentially save tens of thousands of dollars in extra interest repayments and shave years off the term.

Fortunately, there are ways borrowers can save time and money, including making additional and/or more frequent repayments, as well as clipping the length of the loan.

Additional payments

Initially, the majority of regular payments into a house loan primarily cover the interest and not the principal. Making extra payments early on, no matter how small, can make a big difference over time.

More frequent repayments

If your lender allows it, why not make more frequent repayments – say fortnightly rather than monthly. Paying your house loan fortnightly actually equates to paying 13 monthly instalments per year, instead of 12 (depending on your lender). Therefore if you can make more repayments, it makes sense that you’ll trim the mortgage faster.

Lump sum payments

Paying lump sums, such as a salary bonus or other windfalls, into the home loan can also help shave additional interest repayments and the loan term.

A great trick is to pay your annual tax return (if you get one) directly into the mortgage. Do this, and you will notice some interest and time savings.

Shorten the length of the loan

The standard term in Australia for a house loan is around 25 years. As a rule of thumb, the longer the loan term, the lower your regular repayments. However, what you save in repayments now, you will certainly pay for in additional interest in the future.

Therefore by reducing the average 25 year home loan by a number of years, in consultation with a lender, your regular repayments will increase. However, this strategy will help reduce the interest you’ll pay over the long term.

Managing mortgage stress

Even with the best strategies, we can fall into difficulties with our repayments. Should this happen, act early and preferably before missing a payment – by contacting your lender. Most lenders will consider your needs, and can offer options to help you stay on track.

For some of the best house loan rates on the market compare home loans online today.