How to Pay off Your Home Loan Quicker: Practical Tips for Kiwi Homeowners
In today’s economic climate, many homeowners are looking for ways to cut expenses. For most Kiwis, the mortgage is their largest financial commitment, so it’s no surprise that many are eager to pay off their home loan as quickly as possible.
Paying off your mortgage sooner not only brings peace of mind but can also save you thousands of dollars in interest over the life of the loan. While it may seem challenging in a tighter economy, several practical strategies can help fast-track your mortgage repayments. Here’s how you can get started:
1. Round Up Your Repayments
Rounding up your payments can make a big difference over time. For example, if your mortgage repayment is $1,350, consider rounding it up to $1,400 or even $1,500 if your budget allows. These small additional amounts go directly towards reducing your loan principal, helping you pay off your mortgage sooner.
2. Make Lump Sum Payments
Whenever you receive extra funds, such as a bonus, tax refund, or inheritance, consider making a lump sum payment on your mortgage. These one-off payments can significantly reduce your principal, which lowers the interest and can shorten your loan term by years. Just be sure to check with your adviser about any limits on repayments or any early repayment fees before making large payments.
3. Review Your Interest Rate Regularly
Interest rates have a major impact on the overall cost of your mortgage. Even a slight reduction in your rate can lead to significant savings over time. Mortgage advisers may be able to negotiate lower rates than advertised so discuss your interest rate with your adviser in the months leading up to your fixed rate roll over date. Advisers can also help you navigate economic trends and find a rate that works both for your current situation and future plans.
4. Consider a Mortgage Offset Account
A mortgage offset account is a savings account linked to your home loan. The money in this account reduces the amount of your loan that accrues interest. For example, if your mortgage balance is $500,000 and you have $50,000 in your offset account, you’ll only be charged interest on $450,000. This can greatly reduce your interest payments, allowing you to pay off your loan faster. Not all lenders offer offset products, so speak to your adviser if this is something that would work for you
5. Reduce your Loan Term
If you’re in a strong financial position, reducing your loan term can be a great way to pay off your mortgage sooner. While your monthly payments will be higher, you’ll save on interest and be debt-free faster. Your mortgage adviser can help you explore your options and ensure a shorter term is affordable for you.
6. Get Tailored Advice from Your Mortgage Adviser
Every homeowner’s financial situation is different, so what works for one person may not be suitable for another. This is where a mortgage adviser becomes your best asset. A mortgage adviser can assess your current loan, financial goals, and circumstances to recommend personalised strategies to help you pay off your mortgage faster. In a tightening economy, having expert guidance on loan structure, interest rate reviews, and refinancing options is invaluable.
If you’re ready to explore ways to pay off your home loan faster, get in touch with our Queenstown mortgage advisers. We’re here to help you find the best solution for your needs.