Owning your home outright may seem like a distant dream, but with the right strategies, you can pay off your mortgage sooner and save thousands in interest. Here are some effective ways to get ahead on your home loan:
1. Make Extra Payments
Adding extra repayments to your mortgage—whether it’s a small amount each month or a lump sum when possible—directly reduces your loan principal. This lowers the amount of interest you pay over time and helps you become mortgage-free faster.
2. Refinance to a Lower Interest Rate
Refinancing your home loan can be a smart move, especially if you can secure a lower interest rate. A lower rate means lower repayments, and if you continue making the same repayments as before, you’ll pay off your loan sooner.
3. Switch to Bi-Weekly Payments
Instead of making one monthly repayment, consider switching to bi-weekly payments. Since there are 52 weeks in a year, this method results in 26 half-payments (or 13 full payments annually), helping you pay off your loan faster while reducing interest.
4. Make Lump-Sum Payments
If you receive a work bonus, tax refund, or any unexpected cash windfall, consider making a lump-sum payment towards your mortgage. This can significantly reduce your loan term and save you thousands in interest.
5. Use an Offset Account
An offset account works like a savings account linked to your home loan. Any money you keep in this account reduces the interest charged on your loan balance. For example, if you have $20,000 in your offset account and a $400,000 mortgage, you’ll only be charged interest on $380,000.
6. Round Up Your Repayments
A simple yet effective strategy is rounding up your repayments to the nearest hundred. For instance, if your mortgage repayment is $1,850, round it up to $1,900. Over time, these small additional amounts add up, helping you pay off your loan sooner.
Choose the Right Strategy for You
Before implementing any of these strategies, consider your financial goals and situation. Paying off your home loan faster can provide financial freedom, but it’s essential to ensure your extra repayments fit within your budget.
If you’re unsure which option is best for you, reach out to our team at Trusted Financial Choice for expert guidance on home loan strategies that suit your needs.