9 ways to pay off your mortgage faster

Published 15th of March, 2022

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1. Find the home loan for you

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Consider more than just the interest rate to choose a home loan that suits your needs and works with your lifestyle and goals. For example, a home loan with an offset account may come with a higher interest rate than another product but could actually save you more money over time by "off-setting” the money in your transaction account against your loan. So, remember to keep the big picture in mind.

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2. Consider refinancing

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So you’ve reviewed your home loan and found it’s costing you too much. What now? Well, you may want to consider refinancing your home loan. By renegotiating your current rate with your existing lender or moving to a new lender offering a lower interest rate, you could save money and help reduce the term of your principal and interest loan.

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If you’re not ready to refinance, you may be able to secure a lower interest rate just by negotiating with your lender. Check what rates your lender is offering to new customers and if they’re lower, you can ask for your lender to pass you on a lower rate. Your chances of being successful with this are higher if you have a demonstrated history of making on-time mortgage repayments and have a healthy credit rating.

Remember that if you’re on a fixed rate mortgage, you probably won’t be able to alter your interest rate without refinancing (and possibly paying break fees) or waiting until your fixed term ends.

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3. Repay more frequently

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Here’s a tip that does seem like a magic trick. Most lenders let you make fortnightly (or even weekly) repayments rather than monthly repayments.

Because home loan interest is calculated daily, making payments more frequently could help reduce the interest you pay over the term of your loan, helping you become debt free sooner. By paying fortnightly, you’ll end up making one extra repayment per year than if you made repayments monthly.

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4. Look beyond the big banks

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While many smaller lenders are backed by larger banks, they’ll often compete harder for your business.
And as well as sometimes offering more personalised service, you may also find that some smaller lenders have home loan options the big guys don’t, such as:

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• Longer loan terms – for example, 40 years as opposed to 30 years.

• Fixed rate with a 100% offset account.

• Higher loan to value ratios (LVR) – this means you may have to pay a lower deposit.

• Reduced application and ongoing fees.

• Lower interest rates.

• May offer home loans to unconventional borrowers (e.g. self-employed or flawed credit).

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Our lending specialists have access to 60+ lenders including many smaller lenders who can offer better rates than the big 4 banks in Australia. 

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5. Consider offset

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An offset account is a transactional savings account linked to your home loan. When interest on your home loan is calculated, the balance of your offset account is taken off the principal amount owing. This can reduce the amount of interest you are charged and help you pay off your principal and interest home loan faster.

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For example, say you have a home loan of $450,000 with an interest rate of 5%. If you had $50,000 in your offset account, you’d only be accruing interest on $400,000 of your home loan. This means you’d pay $20,000 in interest per annum rather than $22,500, saving $2,500 over the year.

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6. Pay that principal

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Lower monthly repayments may be appealing but, if possible, you may want to consider steering clear of interest only loans. Only paying the interest on your loan for a set period of time means that once the interest only period expires, the required principal amount will need to be paid off at a higher propensity. Repaying both the principal and the interest could be one of the best ways to get your home loan paid off faster.

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7. Stay steady

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If interest rates drop, don’t automatically drop to making minimum monthly payments. It’s still a good idea to try to keep repaying your home loan at the higher rate. The extra money will come off your principal which means you are paying off your mortgage sooner.

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8. Give your loan an annual health check

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Just like people, home loans need a poke and prod every so often. So never set and forget your home loan. In a tight market, lenders will compete for your business, so take some time every year to do a home loan health check to make sure you’re still getting a good deal.

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9. Prioritise your home loan

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Freeing yourself from the mortgage monster means keeping your eyes on the prize. Tightening your belt on some of your less important expenses can add up to significant savings over time. For example, do you really need that iced mocha latte or the branded canned tomatoes?

And make sure all your household services are working hard for you by comparing your electricity and gas, internet providers, or even looking into your health insurance.

There’s no point paying for things you don’t need, or overpaying for things you do, so find where you can make some cuts. You could use the extra cash to make additional payments on your home loan and help to secure a debt-free lifestyle sooner.

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