Home ownership is the dream of every Australian - we all want our little patch where we are king and can do as we please. For the vast majority of us, we enter into a mortgage in order to make this dream a reality. But if you’re clever or lucky enough to be able to pay off your home loan sooner, why wouldn’t you? The Greater’s Wallsend branch manager Jodie Daly explains how you can.
When you’re young and grown up responsibilities seem a million years away, the thought of being in debt for hundreds of thousands of dollars can be a bit stifling. But as we grow and begin to claim our independence, branch out and start families, the desire to own our own home outweighs our hesitancy at entering into a mortgage, and we make the plunge on the house of our dreams.
When we enter a 25 or 30 year home loan, the term can just seem like a number. But once we get a few years down the road, we begin to understand – we’re in this thing for the long haul.
So there will come a time when you, like all home owners, will consider your options when it comes to paying off your home loan sooner. How seriously you entertain these options will depend on your financial situation, of course. But regardless of what state your bank balance is in, there are things you can do if you are looking to reduce your mortgage quicker.
Fixed or Variable Rate?
Firstly, you need to take into account whether your loan features a fixed or variable interest rate. If you have taken a fixed rate, there can be a limit to how much extra you can pay off your home loan without being penalised. If you are still in the fixed rate period of your loan, make sure you contact your bank before making any extra repayments. If you have a variable loan, however, it’s a different story. While some banks may charge extra to make additional repayments on variable loans, The Greater's home loans allow you repay as much as you like off your loan without incurring a penalty.
Make larger repayments
The simplest way to reduce the size of your mortgage is just to increase the amount you chip away each month. This can be easily done, especially if you make the commitment early in the term. If you’re able to make little additions to your repayments now, it can pay off down the track, as you’re also reducing the amount of interest you pay in the long term.
Make repayments more often
If you were to make fortnightly instead of monthly repayments, you’re able to make one extra monthly repayment per year. This is due to the fact that there are 26 fortnights in a year, whereas if you were paying by the month you would only be paying for 24 fortnights (12 months). This extra payment will reduce your interest payment in the long term and build equity in your home sooner.
Lump Sum Repayments
If you’re lucky enough to be sitting on a small pile of cash, you should consider putting it towards your loan, especially in the early years of your term. Tax cheques, inheritances, work bonuses – putting lump sums towards your mortgage will reduce the interest paid and will let you own your home sooner.
What’s more; if your loan is with The Greater, you’re able to make unlimited free redraws on your Home Loan through our Internet Banking service. You can enjoy the best of both worlds – pay more off your loan when you’re flush with cash, and redraw on your loan advance when the time calls.
Whether or not you’re currently a Greater customer, if you want to know more about paying of your loan sooner, why not get in touch with us today? We’ll arrange for you to meet with an expert lender who can help you own your home sooner.
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