How to Repay Your Home Loan in Record Time

The article in the latest Australian Property Investor Magazine (November issue) has some great tips to half your home loan and of course speed up your wealth creation process. A 30 year loan can mean for most people they are paying off more than the original loan amount in interest over the term of the loan. What a scary thought! Let’s take a look at their 16 Top Tips to repay the loan in record time.

  1. Make fortnightly repayments instead of monthly. You will make an extra repayment without noticing it and reduce your interest bill by thousands of dollars.
  2. Make more than the minimum repayment. Even rounding up to the next $10, $50 or $100 makes a difference.
  3. Put every spare cent into your loan: Tax refunds, dividends, pay increases, and any excess funds. (With a redraw facility, this money can be taken out later if needed but saves interest in the mean time.)
  4. Make your first repayment on settlement day. This reduces the principal before the first lot of interest is incurred.
  5. Pay loan establishment fees and legal fees upfront instead of tacking them on the loan.
  6. Shop around for the loan with the lowest interest rate and with features you actually need.
  7. Look for loans that offer features, such as redraw and unrestricted extra payments at no extra cost.
  8. Review your loan annually to see if a better deal is available but aware of any switching costs.
  9. By depositing your pay and living off a credit card with 55 interest- free days, the offset saves interest.
  10. When taking out a fixed home loan, only fix part of the loan so you can make extra repayments on the unfixed portion without penalty.
  11. Make use of internet banking to manage your balance and make extra repayments
  12. Don’t lower your repayments if interest rates fall.
  13. Align your repayments with your pay day or income cycle to minimise interest.
  14. If refinancing, make sure you really will be better off; don’t get ‘churned’.
  15. Look for a loan with portability. This will allow you to transfer to a new property without paying exit and entry fees. Most people don’t stay in the same house for 30 years.
  16. Temporarily park funds in an offset account to reduce your principal.

Some of these simple tips I have already been using and they have saved me hundreds of thousands of dollars over the years so I hope that they do the same for you!

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