Tips: Paying off your mortgage sooner
The Great Australian dream is to own your own home. Some house prices are at ecord highs and seeming to stay that way. It’s much harder for a lot of Australian families, particularly younger families to save on home loans. Taking on a mortgage is a big life decision. A lot of people are scared they’ll be paying off loans well after their kids have reached adulthood. As financially responsible lenders, Smallloans.com.au has put together these tips for paying off your mortgage sooner.
Some of the tips may apply to large loans like car loans and personal loans too, but you should always consult your broker or lender for more information.
Make extra repayments
The one sure fire way to pay off your home loan sooner is to make extra repayments. You should ask your lender if you can do this, as sometimes lenders might slap penalties on you if you decide to go down this route.
Let’s say you’re paying your home loan off monthly. If you switched to fortnightly repayments, you are effectively making 13 monthly payments per year (26 payments all up.) In some cases, these repayments may come with loading – i.e., they are not as “cheaper” as paying monthly instalments.
Some lenders may allow you to make periodic lump sum payments which also helps pay your loan off quicker.
Find a loan with a cheaper interest rate
If you’re on a home loan with a high interest rate, you don’t need to be. Sometimes loan lenders will try to entice you to take out loans with them with what’s called a “honeymoon” or “introductory” period with a below-market rate which bumps up to the full rate after a period of time.
You can shop around for other home loans while still tied to your current lender. This is called re-financing. Sometimes people re-finance to raise more money for extensions, renovations or to consolidate loans.
Other loans may have lower interest rates, lower fees and other benefits like lines of credit. You’ll have to decide what loan’s features are right for your situation. It’s worth shopping around, even if you’re happy with your home loan at the moment. You may be surprised with what you might find.
If you are on a higher interest rate due to bad credit and have made efforts to correct your credit, refinancing may save you lots of money, especially if you are eligible for mainstream loans with market-based rates.
Ask your lender to work harder
If you aren’t satisfied with your current lender, schedule a meeting to discuss better options. After all, you are their customers and they are there to help you. You may be able to switch to a different loan product without paying new fees and keep your same lender. If you tell them you are considering other options, they should be working hard to keep your business. If they don’t, then perhaps that is a sign you should move your loan elsewhere!
Do your homework
As always, it pays to do your homework. People that do their homework are usually the ones paying off their mortgages a lot faster! Having all your knowledge ready comes in handy when looking for new lenders or putting your current lender to task.
The ASIC MoneySmart website has a whole lot of information on re-financing and other helpful tools such as repayment calculators. If you’ve been wondering about re-financing or anything else about paying off your mortgage sooner, it’s worth a visit.
Click here to see the ASIC MoneySmart page on home loans.