12 Quick Ways to Reduce Your Mortgage

mortgage repayment tips

1.   Set up an offset account: Your loan account should wherever possible have an offset account attached. This has the dual benefit of reducing the amount of your loan on which interest is payable, and also providing a savings account.

2.   Make extra repayments: If you happen to come into money from the sale of assets or inheritance, paying this off against the loan will reduce the overall loan amount, as well as any interest on the amount you’ve just paid off.

mortgage repayment

3.   Don’t just pay the minimum repayments: Round up your repayments so that you’re paying off more than the minimum repayment. This will allow you to pay off the loan more quickly, and will also increase your equity in your property, which may open up avenues for you to refinance to a cheaper rate later on down the track.

4.   Pay living expenses off on your credit card: Maximise the use of your offset account by using a credit card for your monthly living expenses. As your offset benefit is calculated by the average amount of money in the account over the month, you’re best off leaving as much money in the offset as possible. Use a no interest credit card and pay off the debt at the end of each month. This only works if you pay your card debt off every month, and if you struggle with discipline around your finances, then this probably isn’t for you.  

 Photo by bruce mars from Pexels

Photo by bruce mars from Pexels

5.   Split your loan: You can split your loan to have a fixed portion to protect yourself against interest rate fluctuations, whilst still maintaining a variable portion of the loan. You can still have an offset account to offset the variable portion of the loan.  

6.   Pay fortnightly or weekly: Increase your repayment frequency to fortnightly or weekly in order to reduce the amount of interest payable on the loan.

weekly payment calendar

7.   Never reduce your regular repayment- even if interest rates drop: If interest rates drop, see it as an opportunity to get even further ahead on your loan. Don’t drop back down to the minimum required repayment, as this will extend your debt and take you longer to pay your loan off.

8.   Make an additional repayment as quickly as possible after settlement: for the majority of loans, your first repayment will be 1 month after your loan has settled. Set yourself up by making an additional repayment as soon as the loan has settled. This has the dual benefit of putting you in front of the required repayments, and also reducing your interest payable as soon as your loan has settled.

9.   Set your repayment date forward, and time it with your pay dates: In addition to the above, you can time your home loan repayments with when your pay is deposited into your account. This simplifies things for you from a budgeting perspective, but if you’re bringing your repayments forward, it also means that you’re paying off your home loan faster.  

10. Work with a good broker to make sure your rate is as low as possible: A good broker doesn’t just get you a loan. They should continue to work for you, continually re-approaching your lender to see if there’s the potential for a rate discount for good conduct. Reducing the interest rate on your loan is one of the most effective ways to pay your loan off faster.

mortgage interst rates

11.                Consolidate your debt: If you have several different loans (credit cards, personal loans, and vehicle loans) which are causing you cashflow issues, then consolidating debt into your home loan may be an effective strategy to get on top of things and to simplify your finances, rather than trying to manage several different loans.

12.                Refinance your loan: Refinancing your loan can be a handy tool to reduce your interest rate if your current lender is unwilling or unable to provide a competitive rate. Rather than just extending your debt for another 30 years, keep your repayments as they currently are in order to pay your loan down quickly.

mortgage refinancing