8 hacks to pay off your home loan faster

Own your home outright sooner with these 8 hacks to help you pay off your mortgage ASAP

25 January 2022|4 minute read

man sitting at laptop looking at home loan

There are a lot of incentives when it comes to paying off your home loan early. Not only will you be relieved of one of the biggest debts of your life, but you’ll also pay less in interest in the long run.

In this article, we’ve compiled a list of 8 hacks you can use to pay off your home loan faster. Whether you have an investment property or you’re an owner-occupier, there’s bound to be something you can do to pay down your mortgage sooner.

1. Get a lower interest rate

A higher interest rate will increase your monthly repayments. When you are paying less each month on interest, you may be able to afford to increase the amount you pay towards your principal.

So aim to get a lower rate but continue paying the same repayment amount.

While refinancing to a lower interest rate may seem like a lot of work initially, it can help you save thousands of dollars over the life of your loan. Find out how much you could save with a lower interest rate using our Mortgage Repayments Calculator.

Plus you may not even have to refinance to get a lower interest rate. Sometimes all you need to do is call up your lender and ask them to match your interest rate to the rate offered to new customers.

If you have been a responsible borrower, they are likely to oblige. Retaining customers is important to lenders at a time when they have to compete for customers.

If you'd rather not increase your monthly minimum repayment amount, you can make extra repayments towards your home loan. The faster you repay your loan, the less interest you'll pay overall.

2. Make more frequent home loan repayments

Did you know that by making fortnightly repayments, rather than monthly ones, you can end up making an extra month’s home loan repayment every year?

This may not seem significant, but that’s the point. You’ll be repaying your loan a little bit faster, and you won’t even notice it!

3. Consider making extra repayments

It may sound obvious, but making extra repayments towards your home loan is a simple way to pay it off sooner. Extra repayments don't need to be made consistently.

When you find yourself with a little bit of extra cash, for example from a work bonus, a tax refund or inheritance, consider putting that money towards your mortgage.

The other benefit of making extra repayments is that you’ll pay less interest since you’re paying off your loan faster.

Bear in mind that if you have a fixed interest rate, you may not be able to make extra repayments without facing penalties. Lenders often charge break fees when fixed rate borrowers make extra repayments or repay their home loan early.

Want to know how much you could save by making extra repayments? Try Aussie’s extra repayments calculator.

4. Open up a redraw facility to dip into your extra repayments

If you want to make extra repayments but don’t want to see the money disappear into the mortgage abyss, consider making use of a redraw facility.

A redraw facility pools any additional repayments you make on your home loan, allowing you to access these funds when you need them.

Lenders often charge a small fee for withdrawing funds from your redraw, but it can be useful when it comes to funding renovations and other larger expenses.

5. Put your savings into an offset account

An offset account is like a savings account linked to your home loan balance. It’s fully transactional, and you can withdraw funds for everyday expenses with ease.

Any funds in your offset account reduce the interest you are charged on your loan principal balance.

For example, if you have a $300,000 home loan balance and $50,000 in your offset account, you’ll only be charged interest on the first $250,000 of your home loan.

Because you’ll be cutting down the interest you’re charged, you could find yourself with more money to put towards home loan repayments. This will help you pay down your loan faster.

6. Be smart when you refinance

Looking to refinance every couple of years is a smart thing to do. While you may not need to refinance this frequently, it’s important to check that your interest rate is still competitive and that your home loan suits your current needs.

Check the following when refinancing:

  • Make sure you aren’t paying for any features you aren’t using. Offset accounts are great, but the usual annual fee is wasted money if your offset is empty

  • With many lenders offering low-fee and zero-fee loans, it’s good to check that you’re not overpaying in fees and charges

  • Be careful when refinancing that you don’t ‘restart’ your loan term. When you refinance, some lenders will automatically begin a new 25-30 year loan term, even if you have only 18 years left, for example. The shorter your home loan repayment term, the better when it comes to saving on interest and owning your home outright sooner

  • Consider whether you are happy with the customer service provided by your current lender

  • If you can get a better deal elsewhere, don’t be afraid to switch lenders. Most lenders don’t reward customer loyalty as much as you might think.

7. Give interest-only loans a miss

Even though interest-only loans can be useful to many homeowners and investors, thanks to their tax benefits, they won’t help you reduce your mortgage any sooner.

To pay off your home loan sooner, you have to actually be making repayments towards the principal (i.e. loan amount) and not just the interest accruing on top of this balance.

8. Decrease your loan repayment term

It’s likely that your personal life circumstances have changed since you first secured your home loan.

If you’re in a more comfortable position financially, you may look to decrease your loan repayment term. For example, from 30 years to 25 years.

To make this possible, you’ll have to increase your minimum monthly repayment size. If you can comfortably afford this increase, you could find yourself paying off your loan years early with thousands of dollars of interest saved.

If you want to own your home outright sooner, refinancing may be the place to start. To learn more about your home loan options, book in an appointment with your local Aussie Broker today.

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