We all want to know how to reduce our debts quicker, so what should you do?
Ten useful tips for paying off your home loan faster:
1. Ignore the minimum
Paying more than the monthly minimum is a great way to get on top of your home loan and save money. For every $10 you make in extra repayments, you could save as much as $20 in interest and as much as 10 years off your loan! Likewise, if you get a bonus or have some extra money, putting this into your motgage can reduce the debt at a quicker rate. This is a great way or reducing your debt but make sure your home loan allows you to make extra repayments without being charged a fee.
2. Ask an expert
Have you ever been to a restaurant and asked the waiter "what's good on the menu?".... Because they work there every day you would think they know a bit about the food they are serving right? It's even more true with mortgages. A mortgage broker deals with mortgages every day and talks to various lenders constantly. Find yourself a fully accredited mortgage broker who can negotiate you a great rate along with flexible features, and you could be saving thousands on your home loan. Look for a mortgage broker who is experienced and personable.
3. Tax tax tax...
Australian taxation laws allow for property investors to deduct certain property related expenses. Things like travelling to your property to do repairs, collect rent or perform a rent inspection can sometimes be deducted, and the property itself may be able to be depreciated. A good accountant will help maximise the return on your investment and your tax benefits, so it's work talking to someone and finding out what you can and can't claim.
4. Move your money
A typical home loan interest rate is between 6 and 8% while your savings account may pay from 1% to 5%. For every dollar in your savings account earning you interest there is a dollar on your principal balance costing you as much as twice that interest.
5. Low means high?
When interest rates are low keep your payments high. The banks do not automatically lower your monthly repayments when rates go down so if you can afford to keep paying the higher amount then keep doing it! Paying more than the minimum required will knock years off your home loan and thousands of dollars in interest.
6. Increase Your Frequency
If you pay your home loan more frequently than once a month, instead of 12 annual payments, you may make 13 repayments each year, and this can save some people up to eight years of the loan term. Many loan structures allow you to pay weekly or fortnightly. As interest is calculated daily, you save interest by paying this way because you are reducing the loan balance more frequently.
7. Secure a lower interest rate
While there is more to a loan than just the rate, it is worth considering that a difference of just 0.5 per cent amounts to more than $100 per month on a $250,000 mortgage. The major benefit of this is that you can pay off the loan principal quicker by paying less interest.
8. Consider all lenders carefully
Not all lenders are created equally, the difference in fees and interest rates differ across the board, not to mention the level of service offered. Non-banks lenders have some great home loan products, some which have lower rate than the big banks, but some customers still prefer the security of a big bank with a recognised name.
9. In the beginning...
Consider looking at introductory loans or ‘honeymoon’ periods. These are loans that offer you a low interest rate, sometimes as much as one per cent lower than other loans, for an agreed term, usually up to a year. Borrowers can save money by using this lower rate, however, these loans are often inflexible and do not allow for early repayments. Once the introductory period ends, the lean will revert to a higher rate, usually the same rate at the variable rate, so it is important to check this out before signing up for this type of loan.
10. Line of Credit
Having a portion of your loan in a line of credit facility and depositing salary credits to the account and then drawing the salary from the account when required may also reduce interest and term as long as the lender does not charge a premium on the line of credit account.
Want to pay off your mortgage faster? Talk to Your Local Finance on  to talk more about your options.
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