Typically property investors not only have investment loans but also a home loan which is not tax deductible, so they’re keen to pay this off as son as they can.
This is not necessarily the best strategy – I feel using surplus funds to buy another property is better “bang for bucks” that paying off your home loan – but I’ll cover this topic in a future blog.
However today I’ll discuss a number of ways you could pay off your home loan sooner:
1. Pay more than the minimum repayment.
This is what many Australians did over the last few years as interest rates fell, they didn’t cut their repayments and got ahead on their mortgage repayments.
2. Make extra repayments.
Either make an extra repayment or 2 when you’ve got some spare cash or better still make fortnightly repayments rather monthly.
You see…there are 26 fortnights in a year, so you will essentially pay for 13 months instead of 12 months with monthly repayments.
3. Consider an offset or redraw account.
Offset accounts or redraw facilities are features of certain home loan that allow you to use any extra income or savings to reduce the balance of your loan, thereby reducing your interest repayments.
4. Choose your loan carefully.
There are so many loans with a myriad of features, and while interest rates are important, they’re not near the top of my list when I look for a loan.
I look for flexibility, ease of making extra repayments and the ability to redraw funds if I need to.
That’s why I suggest using a proficient finance broker to cut through the maze of loans for you.
5. Don’t be scared to switch banks.
It’s a very competitive business environment out there and banks are always looking to get new clients.
At any one time some are more aggressive than others for new business, coming up with new loan products or more attractive deals.
You can switch with the same lender, or change to a new lender altogether. That’s where your broker will advise you.
And don’t be scared to move away from the big 4 banks. It doesn’t really matter what colour logo is on your bank statements. You’ll possibly find some of the smaller lenders will be more aggressive for your business.