Book an appointment
Book an appointment

Pay off your mortgage faster and save Pt 2

28.06.22 | Marc Barlow | Resources

Make payments more often

This idea is simple to understand. The bigger your debt (the ‘principal’) the more interest you pay. Interest is calculated on the size of your debt. So if you pay down your loan with more frequent payments, you’ll often have a slightly lower loan debt at the time the interest is calculated.

Monthly repayments are the default setting, but most loans allow you to switch to fortnightly repayments. There are 12 months in a year, there are 26 fortnights. Doing this has two subtle results:

  1. Every time your interest is calculated, the principal is slightly smaller than it would have been with monthly payments. Therefore, the interest is slightly less too.
  2. You’ll make two more payments in the year, putting you ahead in your repayments.

If your repayments are $2500 per month, switch to $1250 every 2 weeks. Over the course of a year, you’ll pay an extra $2500 and probably won’t even notice it.


Pay more than your minimum

Related to the previous point, it’s worth increasing you’re repayments to more than the required minimum. Again, even small amounts count over a long-term loan.

If your lender wants $1250 a fortnight, pay $1280. Or $1310. Stretch yourself a little bit and the long-term impact could be significant.


Anything extra goes on the loan


Every now and then, if we’re lucky, a little bit of extra money comes our way. It might be a 3% pay rise, a $1000 tax return, an inheritance, a $100 birthday gift from your uncle, or a bonus.

If you didn’t have the money before, you won’t miss it. Slap it all straight onto your loan debt. In the first five or 10 years of a loan, this is especially important. Whether you were paying attention in maths at school or not, compounding laws still apply. You’ll save way more than you’d imagine!


The advantage of an offset loan

Offset loans are neat. You link your regular transaction account to you loan, and any money in you have is considered to be paid into your loan.

If you have a $700,000 mortgage and $20,000 in your regular bank account, your interest payment is calculated on $680,000.

This is particularly beneficial if your regular income is paid into the linked account. Marry up repayment fortnights with paydays and you’ll pay interest on the lowest possible loan amount.

Plus, you still have access to the cash if you need it.


Find the right loan for you

Finding a loan with a low interest rate is great; but it’s not the only consideration when finding a loan. Otherwise, everyone would have the same loan!

Borrowers have different property goals, financial situations and lifestyle choices. Some people want to pay off their mortgage fast. Others want to travel regularly, pay school fees, have cash on-hand for health and other emergencies, buy an investment property…

Brokers at the Mortgage Broker Group listen to you, assess your financial situation and help you find the best loan for your individual circumstances. We have access to hundreds of loans, and can take to stress out of choosing. Best of all, our service is always at no cost to you. (Lender fees and charges may apply).


Talk to us

Contact Mortgage Broker Group and we’ll help you find a great loan and give you more tips on paying off your loan faster.