Pay off your home loan faster

For most people, a house will be the most significant purchase they make, resulting in many years of paying a home loan. So, we're not surprised if you want to pay yours off as soon as possible. Doing this saves money in interest and relieves the financial burden of the debt. If you're dreaming of owning your home outright sooner rather than later, here are six ways to help you get there.

1. Make weekly or fortnightly repayments

If you can, schedule your repayments either weekly or fortnightly, instead of monthly. If you pay fortnightly, you'll be making 26 repayments in a year, which is equivalent to 13 monthly repayments. This means you'll be paying one month's worth of extra repayments each year.

Your extra repayments go directly towards reducing the loan principal faster, meaning less interest is charged, then more of your future repayment goes toward the principal which ultimately reduces your loan balance faster. 

2. Make extra repayments

By making extra repayments, either regularly or as lump sums, you're paying off your home loan faster by shortening your loan term, and in turn reducing the amount of interest you pay. 

Instead of making your minimum repayments, increase the regular amount you're paying. Even a slight increase can make a difference and help you pay off your home loan faster. Or consider putting unexpected extra funds straight into your home loan, such as a work bonus, your tax refund, or a birthday gift as a lump sum payment.

If interest rates drop and your minimum repayment decreases, keep your regular repayment at this higher amount if you can.

See how much you could save with our extra repayments calculator.

3. Use an offset account and/or redraw facility

What is an offset account?

An offset account is a separate transaction account linked to your eligible home loan, and the balance reduces the interest payable on your home loan balance each month.

For example, if you have $20,000 in your offset account and your home loan is $400,000, you'll only be charged interest on $380,000. 

What is a redraw facility?

A redraw facility allows you to access those extra repayments that you have made over and above your minimum scheduled repayments, subject to the conditions of your loan. At People First Bank, a redraw facility is available on all our variable and fixed home loans.

What is the difference between an offset account and a redraw facility?

So, the simplest way to think about it is:  redraw is a feature available on your home loan itself, whereas an offset account is a separate transaction account linked to your eligible home loan.

Both can help reduce the amount of interest you pay on your home loan and pay off your home loan sooner but depends on what is available to you on your home loan.

4. Keep reviewing your home loan

Although it's a long-term debt, your home loan isn't something you should set-and-forget. As circumstances change, it's important to make sure your it continues to work for you.

Interest rates impact how much you're paying in home loan repayments. Whether you're on a variable or fixed rate, or you've got a split loan, consider if it's still the best option for you. If you're wanting to change your interest rate, you might be able to refinance to a new loan with a better rate. Make sure you won't incur any fees or break costs by doing so. For more information on interest rates and home loans, check out our tips on how to choose a home loan.

Are you looking to refinance to People First Bank? Check out our refinance calculator to see how much you could save.