Can I pay off my home loan early?
Buying your first home is a major milestone, and cause for celebration. But soon after the champagne has popped, the reality of mortgage payments for 30 years can hit hard.
But there are a few simple ways you can get ahead of your payments, thus reducing the amount of interest you’ll pay, and have your home paid off sooner.
If it’s within your budget, pay more than the minimum amount due. Not only will this give you some breathing room and prepare you well for any interest rate increases, it will start getting your principal paid off when it’s at its highest. Note: some home loans cap extra repayments, so be sure to check with your bank what the best option is for you.
Make your Offset an Asset
If your home loan offers offset accounts, make the most of them. Each dollar you have in your offset account is a dollar you’re not paying interest on for your home loan. Less interest means you’ll be paying more off the principal, and chipping away at the lifetime of the loan.
Redraw is your safety net
There to help you in case of emergencies, redraw allows you to pull from your extra repayments if the need arises. Knowing the option is there can help you put more money towards your home loan without the stress of being caught short.
Sync Up Your Pay Cycle
Most home loans are talked about in monthly payments, but you have the option to pay weekly, or fortnightly too - often this will mean an extra couple of payments a year. By scheduling your repayments to the same day you’re paid, you’ll be able to plan your budget around it.
Each year or so, you should be reviewing your home loan along with your current circumstances to see if it’s still the best option for you.