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Pay off your home loan faster
Own your home outright and enjoy a mortgage-free lifestyle sooner
We don't just help you get into a great home loan. We help you get out of it too.
There are numerous ways to pay off your mortgage sooner. From traditional methods of debt reduction, such as increasing your repayment frequency, to fully customised strategies that help borrowers own their home outright in about half the time of a 30-year mortgage.
Keep reading to discover more.
IMPORTANT DISCLAIMER
This information is general in nature and does not take into account your personal circumstances. Please get in touch with us to speak with a lending expert. Do not make any decisions before seeking professional advice.
Buying a home is the biggest investment most people make in their lifetime
Getting into the property market can open the way to wealth and financial independence, but it is not a set-and-forget decision.
At the time of writing, the average Australian mortgage balance is $624,000. But "average" is only part of the picture. Mortgage size differs widely between states and cities. In New South Wales, for example, the average new home loan balance is $785,000.
At the current average mortgage interest rate of 6.6% over a 30-year loan term, the average New South Wales borrower is looking at monthly repayments of more than $5000, and total interest charges of more than a million dollars. This is how a home loan can become a debt prison. However...
When mortgage debt is managed correctly, your home loan can open the way to wealth and financial freedom.
GOOD NEWS FOR HOME LOAN HOLDERS:
Home ownership continues to offer greater housing security than renting, as well as improved financial stability and a more reliable pathway to wealth.
CASE STUDY:
How to pay off your home loan sooner
There is no single best way to pay off your mortgage faster. The key is to apply all of the methods at your disposal.
We've created a case study to show how much you might save by following these approaches. The calculations are based on certain assumptions: a balance of $500,000 and an interest rate of 6.6% over a term of 30 years.
WORKING FIGURES
Home loan balance:
Interest rate:
Loan term:
Minimum monthly repayment:
Loan fees:
Total interest (30 years):
$500,000
6.6% per annum
30 years
$3,193
$0
$649,586
The following calculations are indicative and based on simplified assumptions. For a customised analysis, please contact us.
Let's compare these common debt-reduction methods to see how much money or time you would save:
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Increase your repayment frequency
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Make extra or higher repayments
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Utilise an offset account or redraw facility
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Refinance to a lower interest rate
It is important to note that the calculations below assume that the borrower is able to stick to the given method consistently for the entire duration of the loan. In reality, life events and competing financial goals (e.g. kids, holidays, home improvements) mean that most people fluctuate in their ability to make extra home loan payments.
METHOD 1
Increase your repayment frequency
Switching from monthly to fortnightly payments is equivalent to making an extra monthly payment over the course of a year. Some lenders also provide the option of weekly repayments.
Fortnightly repayment: $1,597
Total interest saving: $152,063
Time saved: 6 years
METHOD 2
Make extra or higher repayments
Extra repayments come off your principal, which reduces the interest you owe. Some loan products (e.g., fixed interest) may not allow extra payments or may impose a cap. Let’s assume that you pay an extra $200 per month.
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Monthly repayment: $3,193 minimum + $200 extra
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Total interest saving: $120,786
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Time saved: 4 years, 8 months
METHOD 3
Keep spare cash in an offset account or redraw facility
Got spare cash? The balance of any savings (offset) or extra payments (redraw) come off your principal and therefore reduce interest exposure. Not all loan products include these features.
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Offset balance: $10,000 (for 29.5 years)
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Total interest saving: $58,090
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Time saved: 1 year, 6 months
METHOD 4
Refinance to a lower interest rate
Refinancing to a lower rate can lower your payments. Alternatively, maintain your previous repayment amount to shorten the loan's duration.
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New interest rate: 6.2% per annum
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New monthly repayment: $3,062
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Total interest saving: $47,142 or...
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Time saving: 3 years, 2 months
DID YOU KNOW?
At My Finance Agent, we can often negotiate a lower interest rate or improved loan terms for our clients without them needing to refinance. It's all part of our free annual Home Loan Health Check service.
Want to break free even sooner? We can design a customised strategy for you.
Looking for faster results? Tax minimisation? Want to make your money work smarter? We can help create a customised plan that utilises an investment property or portfolio to pay off your home loan sooner.
Our 'break free' approach is a 10 to 15 year strategy that relies on the capital growth of an investment property to pay off the balance of your primary residence and leave you debt-free.
It is formulated for people who have 15 to 20 years remaining on their mortgage, are willing to hold an investment property for 10 or more years, and ideally have equity in their home.
Instead of cutting a couple of years off your mortgage, the aim is to pay off your home loan in about half the remaining time and save hundreds of thousands of dollars in process, with minimal out of pocket costs along the way.
We work with a trusted selection of Australia's leading property experts to help you find the right investment opportunities.
CHRISTOPHER JONSON
Managing Director
You are invited!
My Finance Agent's free and exclusive property market seminar with Australia's leading property expert Bluewealth
Come along and enjoy a drink and nibbles as all of your property investing questions answered:
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What are the numbers you need to know and how to find them?
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What makes the property investment the best opportunity for building wealth?
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How much money do you need to hold an investment property?