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‘Owning’ a home is a priority for many Australians. But, do you really want to wait for 25 years to own your home? Or, would you rather pay off the mortgage quickly and live debt-free in the golden years of your life?

 
Simple hacks to pay down your mortgage in 10 years
 

There are several advantages of prepaying your home loan, such as:

  • Savings on interest
  • Reduced mortgage stress
  • Increased home equity

There’s also the psychological benefit of being debt-free. Studies indicate that people who find it difficult to pay off their debts are more likely to suffer from depression, stress and anxiety. And, with mortgage interest rates expected to hike in the future, it is prudent that you pay off as much debt as possible when the rates are still low, to avoid mortgage stress in the times to come.

Today, we share with you 7 tips to pay down your mortgage faster:

Pay your first instalment before it falls due – Your first repayment falls due after a month of settling your mortgage. However, if your lender allows, it is a good idea to make the first repayment on the day of settlement itself. This way, the entire repayment amount would be applied towards the principal, bringing down the amount of interest on all your future repayments.

Make repayments more frequently – If you make your repayments monthly, consider switching to fortnightly payments to make one extra monthly repayment effortlessly at the end of the year. Why? Because there are 12 months in a year and 26 fortnights!

Apply any windfall income towards your mortgage – Applying any lump sum payments towards your mortgage can reduce your debt magically. Any windfall gains such as your tax refund, annual bonus, gift money or a small inheritance can make a big dent in your mortgage. Calculate your savings here.

Round up your repayment amount – Any additional amount paid towards your home loan takes you closer to your dream of being debt-free sooner. Pay a little extra each month, without feeling the pinch, by rounding up your repayment amount to the nearest hundred dollars. For example, if you pay $1,360 to your lender each month, consider rounding it up to $1,400. Soon you’d be accustomed to the increased amount, and these few dollars would go a long way in chipping thousands off your home loan.

Rent a part of your house – Making additional repayments requires extra money. So, why not use your most precious asset, your home, to make some additional income that can be used to pay off the mortgage on it. If you have a granny flat on your premises, you could always rent it out to make some extra money. Or, if you happen to have a spare room, try listing it on Airbnb. From renting out your entire home while you are on holiday to renting out a room, Airbnb even allows you to rent a couch to tenants.

Demand a lower rate from your bank – Of late, banks are offering their best deals to new customers while loyal customers continue paying interest at higher rates.

If you want to save money, experts recommend that you review your home loan regularly and ask your bank for a lower rate if you find yourself paying above the market average.

Once your bank knows you mean business and won’t hesitate to switch lenders for a better deal, it is likely you’d be offered a reduced rate if you have been a loyal customer with a good repayment history.

If, following a call to your lender, you are not satisfied with the reduced rate, you can always consider refinancing with another lender if it means more savings on your mortgage. Learn more about refinancing here.

Read how Mr Shah is saving money each month after refinancing to a lower rate negotiated by a HashChing mortgage broker.

Choose the right home loan – If you plan to pay your mortgage faster, opt for the right home loan features at the outset. For example, you should be able to make extra repayments as well as redraw the additional funds in the case of an emergency, at no extra fees. Another option is to have a 100 percent offset account linked to your mortgage. With an offset account, the funds you put in the account are used to reduce the interest on your home loan. Learn more about offset accounts here.

In case you are looking for a home loan but don’t know the exact features you need, just tell your mortgage broker what you want out of your home loan so that he or she can guide you to the best-fit product for your requirement. Speak to an expert here.

HashChing is Australia’s first online mortgage marketplace that allows users to compare broker-negotiated mortgage rates from over 60 lenders across Australia. Users can also post their home loan queries online to have them resolved by experts in a transparent manner, free of cost.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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