If possible, try paying off your loan faster by making extra repayments and increasing your repayment frequency.
Make the most of your loan features by saving money in your offset account and making extra repayments into your redraw facility, if you can.
Focus on paying down your principal balance by avoiding interest-only and fee-heavy loans, if this suits your goals.
Regularly review and compare your rate with other lenders, then negotiate with your lender or look to refinance if that suits you.
Buying a home is a major financial commitment. After saving your deposit and securing your new place, the work doesn’t stop there. Your mortgage means ongoing repayments, interest, and other costs to manage.
Whether you’re about to buy or already on your homeowner journey, staying organised and on top of your finances is crucial. It helps you meet your commitments and develop healthy habits to avoid paying more than necessary.
In this guide, we’ve put together some key tactics that might help you on this journey. And remember: always check with your broker or financial adviser for tailored guidance.
Try to pay off your loan faster
More repayments means less interest over the life of a loan
Make extra repayments (if you can)
One option you have is to make extra repayments on top of your regular repayments. Many borrowers consider this when they have an extra lump sum available, such as a bonus or tax refund.
Note that it’s important to check with your financial adviser or an Aussie broker if making extra repayments is suitable for you. Also ensure to check your loan terms, as some loans (namely fixed loans) have limits on extra repayments.
How it can help: The faster you repay your loan, the less interest you may pay overall, depending on your loan features.
Increase your repayment frequency
Another option to consider is increasing your repayment frequency to help pay off your mortgage faster. Some borrowers switch to fortnightly payments, or weekly where suitable.
How it can help: Speeds up your journey to becoming debt-free and can mean paying off an extra month each year, often without noticing.
Aussie tip: See how you might save on interest with an extra repayments calculator.
Depending on your loan and financial situation, extra repayments can support your journey to becoming debt-free. Try our extra repayments calculator to see how they might help.
Make the most of loan features you’re paying for
Offsetting interest or making flexible repayments can help you save
Open an offset account and save on interest
What’s an offset account? A savings account linked to your home loan that offsets interest. Say for example you have a $500K loan, and you put $50K in your offset account; this means you’ll only pay interest on $450K.
Note that this is one of the ways offset accounts work, and they vary between lenders.
How it can help: It can help you keep your savings separate while potentially reducing the interest you pay on your loan.
Make extra repayments in a redraw facility so you can access your cash if needed
Remember we mentioned making extra repayments as an option? One way to do this is through a redraw facility, which can be a useful choice for some.
What’s different about it? Essentially, you can redraw your extra repayments if you need the funds back, whether for an unexpected cost, emergency, or other reason.
How it can help: You could pay off your loan faster, save on interest over the life of your loan, and get your cash back if you need it. It’s a more flexible option to make extra repayments.
Avoid loans that get you there slower
Focus on paying your principal balance and avoid fees where possible
Avoid interest-only loans
It’s important to check your loan type. If you’re on an interest-only loan, your payments cover interest only, so your principal balance (the money you owe) isn’t reducing. This means you’re not reaching your goal of becoming debt-free as quickly as you could.
Note that in some cases, interest-only loans can be useful, for example investors looking to buy and sell quickly. But if your goal is to reduce your balance sooner, they may not align. with the goal of reducing your balance sooner.
How it can help: You can focus on reducing your mortgage principal faster, pay less interest over the life of your loan, and avoid a payment shock when principal repayments begin after the interest-only period.
Try to skip fee-heavy home loans
To avoid paying more than necessary, consider avoiding loans with high fees. Some loans include ongoing or administrative fees, so it's important to compare these when reviewing options.
If you’re paying fees for an offset account or redraw facility, as mentioned earlier, make sure you’re using these features. If not, consider switching to a lender with fewer or lower fees.
How it can help: Reduces extra costs and helps you pay down your principal faster.
Lower your rate and loan fees (if you can)
Review your rate and fees regularly because you might be overpaying
Negotiate your rate or look to refinance
Regularly reviewing your rate is important, especially if you want to reduce costs and reach your debt-free goal sooner. This doesn’t always mean you’ll make a change, but it’s wise to compare your options. Review your loan and consider negotiating your rate with your current lender or look to refinance if that’s suitable.
How it can help: Another lender might have a more affordable option (and/or with better loan features), which could result in significant savings. Even a small rate change could potentially save you thousands over the life of your loan.
Watch out for “hidden fees” (and reduce where you can)
As we shared earlier, for some borrowers, avoiding fee-heavy loans can be beneficial in paying off your home loan faster. No matter what type of loan you’re on, or looking into, it’s vital to review the details. Some lenders add hidden fees you could avoid elsewhere.
That said, low-fee loans sometimes come with fewer features, so it’s about what works best for you. Ideally, avoiding fees is preferable, but sometimes paying them is worth it to get the right rate and features.
How it can help: You might find you could be paying much less elsewhere.
Aussie tip: Regularly review your loan and lender – is it still right for you?
Whether you’re on an interest-only loan and want to focus on your balance, your financial situation has changed, or your lender’s rates have increased, there are plenty of reasons to review your loan and make sure it still suits your needs.
Watch the market and stay informed
From financial news to cash rate announcements and lender rate changes
Keep up to date on market news
Whether you’re about to buy or you’re already a homeowner, it’s important to stay informed about the property market and broader news. Things like which areas are more or less expensive, updates to government schemes, and other relevant news are important to be aware of.
How it can help: Staying informed helps you make confident decisions.The more you’re aware, the better informed your decisions can be – with help from your broker or financial adviser, of course.
Watch out for rate changes
From staying informed about RBA cash rate announcements to monitoring your lender’s rate changes and comparing offers from other lenders, this is a vital tactic for soon-to-be and existing borrowers.
How it can help: You might discover you’re overpaying and find a more affordable rate with another lender.
Aussie tip: Use an interest rate change calculator to see the impact
See how your repayments could change if your lender increases your rate with our interest rate change calculator. Remember, even the smallest rate change can have significant impacts!
Focus on paying down your principal and stay clear on your options to help pay off your mortgage sooner
With a proactive, forward-thinking approach (as you’re already doing by researching) and practical tactics like the ones we’ve outlined in this guide, you can focus on reducing your principal and help reduce extra costs where possible.
And remember, check in with your broker or financial adviser to see what works for you.