How to Pay Off Your Mortgage Faster: Proven Tips for Aussies

Understanding Your Mortgage Structure

Before diving into ways to pay off your mortgage faster, it’s crucial to understand your mortgage structure. Australian mortgages typically offer variable, fixed, or split rates, each with unique features and flexibility. Knowing how your mortgage works can help you leverage it to your advantage.

Make Extra Repayments

One of the most effective ways to reduce your mortgage is by making extra repayments. By paying more than the minimum requirement, you reduce the principal amount faster, which in turn decreases the interest you pay over the life of the loan. Most lenders allow additional payments on variable rate loans without penalties, but always check the terms if you have a fixed rate.

Switch to Fortnightly Repayments

Switching from monthly to fortnightly repayments can significantly cut down your loan term. By making 26 fortnightly repayments a year instead of 12 monthly ones, you effectively make an extra month’s repayment annually. This simple switch can shave years off your mortgage.

Consider an Offset Account

An offset account is a powerful tool for reducing interest. By linking a transaction account to your mortgage, any funds in the account are 'offset' against your loan balance, reducing the interest calculated. If you've been diligent with savings, this can significantly lower your interest and hasten the payoff process.

Refinance for a Better Rate

Refinancing your home loan can offer a lower interest rate or better terms, which can lead to significant savings. Keep an eye on the market and be ready to switch lenders if a better deal arises. Remember to factor in any exit or establishment fees to ensure the savings outweigh these costs.

Increase Your Repayment Amounts

If you receive a pay rise or windfall, consider increasing your regular repayment amounts. Even a modest increase can drastically reduce your loan term. Use online calculators to see how much you could save by upping your repayments.

Avoid Temptations of Redrawing

While redraw facilities offer flexibility, be cautious about using them for non-essential expenses. Redrawing can extend your loan period and increase the total interest paid. Discipline in using this feature solely for emergencies is key.

Common Mistakes to Avoid

• Ignoring Fees: Always consider fees when making extra repayments or refinancing. They can quickly erode your savings.
• Overcommitting: Ensure extra payments don't strain your finances. Maintain a balance to manage unexpected expenses without compromising your lifestyle.
• Not Reviewing Loan Terms Regularly: Mortgage products evolve. Regularly reviewing your terms ensures you're not missing out on better options.

How Esteb and Co Can Help

At Esteb and Co, we specialise in tailoring mortgage solutions that align with your financial goals. Our experienced brokers offer insights into the latest mortgage products and work with you to strategise repayment plans that suit your needs. Whether it’s refinancing, setting up an offset account, or adjusting repayment schedules, we’re here to guide you every step of the way.