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					17 tips to pay off
your mortgage faster

   It’s in your best interest.




1. Make extra repayments                                    instead. This method will result in you paying an
Both consistent and ad-hoc additional repayments            additional month’s worth off your mortgage every year,
such as bonuses and tax returns work to reduce the          reducing the principal faster. Check the fine print in
principal on your mortgage faster. The earlier in the       your loan documents to ensure your lender has not
loan term you begin making additional repayments,           calculated your fortnightly repayments to equal half
the greater the benefit in terms of time and money          what the monthly repayment would have been, as
saved.                                                      this will not save you in time or money. Use the extra
                                                            repayments calculator for an indication of how much
2. Make your first repayment on settlement date
                                                            you could save with different repayment amounts.
Your first home loan repayment will generally fall
due one month after settlement. Making your first           5. Look for a cheaper rate with good flexibility
repayment on your settlement date reduces the               The easiest way to pay your loan off sooner is to find
principal before the first lot of interest accrues on the   a lower rate than the one you currently have, but
amount you have borrowed.                                   maintain (or even increase) the amount you pay each
                                                            month. Look for a loan with a low rate that has the
3. Make extra repayments right from the start
                                                            flexibility you require to make additional repayments.
Regular additional repayments made right from the
                                                            There are a number of lenders whose rates differ
beginning of your loan term will have a much greater
                                                            significantly from the major banks’ rates that still offer
effect on the overall time and cost of your loan than
                                                            good flexibility, but if you are going to refinance, make
starting five or ten years into the loan. Even if you are
                                                            sure the costs of doing so do not outweigh the benefits.
already more than five years into your loan term, you
can still make a considerable saving by starting to make    6. Pay loan fees and charges up front
additional repayments now.                                  Pay establishment fees, legal fees and Lenders
                                                            Mortgage Insurance (if applicable) up front rather than
4. Make repayments more often
                                                            capitalising them into your loan. This will save your
If your loan repayment amount is calculated monthly,
                                                            thousands of dollars in interest over the loan term.
you can make significant additional savings by halving
your monthly repayments and paying fortnightly
7. Look for loans that offer features without a charge     12. Set up an offset or salary credit account
Some loans will charge a fee for every redraw or extra     Make your earnings work as hard for you as you do for
repayment, to switch from a variable to a fixed rate, to   them by setting up an offset or salary credit account.
port your loan to another property, take repayment         The additional money left in your account every month
holidays etc, but some won’t. You can save the cost of     will help to reduce the interest you are charged.
fees if you know what you’re likely to use and find a
                                                           13. Align your repayments with your income cycle
loan that doesn’t charge you to use it.
                                                           If you have an offset account, changing your
8. Negotiate to make savings                               repayment dates to match your income cycle helps you
You may find this more difficult now due to the current    to take advantage of the money sitting in your account
global credit situation, but you can still make some       for as long as possible.
useful savings by negotiating with your lender on
                                                           14. Don’t lower your repayments when interest rates
things like interest rates and fees. Your local mortgage
                                                           fall
broker will be able to help you focus on the area you
                                                           With interest rates currently falling, it may seem
are most likely to achieve a saving, but as a guide,
                                                           tempting to let your home loan repayments keep pace
interest rates and establishment fees in particular are
                                                           with the minimum required repayments and pocket
good places to start your negotiations. Good savings
                                                           the difference. Before doing this, consider that keeping
and credit history and good work history will help you
                                                           your repayments at the old level will shave a significant
here.
                                                           portion of principle off your loan, particularly if rates
9. Cut back on expenditure                                 continue to drop.
Reduce expenditure on vices and redirect the money
                                                           15. Review your loan regularly
into your home loan instead. Smoking, an after-work
                                                           Reviewing your loan regularly will help you to assess
beer, morning coffee and that afternoon chocolate
                                                           its effectiveness and take steps to correct any waste if
fix all add up over the course of the week. Add to that
                                                           necessary. Being on top of changes rather than waiting
buying at least one lunch, breakfast or dinner a week
                                                           months or even years will potentially save you a lot of
and you could be putting more than $50 extra a week
                                                           money.
into your loan.
                                                           16. Make use of internet banking
10. Look outside the big banks
                                                           The convenience and cheapness make this an ideal tool
The big banks aren’t the only, or even the best, places
                                                           to arrange your finances in a way that is most beneficial
to borrow money. Many smaller banks, specialist
                                                           to you. Schedule payments to go when you derive the
lenders and credit unions have very competitive loans
                                                           most benefit in terms of your home loan.
available. Just because you haven’t heard of a lender
doesn’t mean they aren’t a reputable lender –your local    17. Combine for more saving power
mortgage broker will know which lenders are credible       Trying two or more of these tips in conjunction can
and suitable for your situation.                           ramp up your savings dramatically.

11. Home loan portability
A lot of people don’t stay put in the one place for the    If you are looking for home finance that is in your best
25 or 30 years their loan covers. Many home loans offer    interest, it pays to talk to a mortgage broker who can
a feature called loan portability, which allows you to     help you understand what your home loan options are
transfer your loan to a new property when you move         as well as set up your savings scheme with the right
on. Because it’s the same loan, you avoid the cost of      bank for you.
paying exit and entry fees.




With so many home finance options on the market a Loan Market Home Finance Broker should be the first person you
visit before you even start looking for your home.
For more information on home finance, pre-approval or the home loan that is in your best interest,
talk to Nick Rundle  Home Finance Broker  0401 092 087 nick.rundle@loanmarket.com.au


                                                                                  Australian Credit Licence Number 390222

				
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posted:9/21/2012
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