Melbourne’s Best Independent Mortgage Broker – available 7 days a week

Tips to Pay off Your Mortgage Faster!

How To Pay Off Your Mortgage Faster

Share This Post

With improving credit conditions, your Melbourne Mortgage Broker What If We Finance is committed to helping you figure out the fastest way to pay off your mortgage. Our experience has taught us that there are several options available to you to pay off your mortgage faster.

Our tips to pay off the mortgage faster can be summarised as follows:

  1. Reduce the interest rate you pay
  2. Reduce the fees you pay
  3. Make extra repayments
  4. Use your offset or redraw facility effectively

To illustrate the power of the above options we will use an example based on a home loan of $250,000 over 25 years.

Reduce the interest rate you pay

By reducing your interest rate you can save thousands over the life of your loan. If you are paying a standard variable rate this unacceptable. Consider the following?

Reduce the rate you pay by 0.5% from 3.00% to 2.50% and you save $82 per month (repayments reduce from $1,941 to $1,859 per month). This saves you $984 per annum or $24,600 over the life of a $25 year loan. You can see the power of interest rate savings first hand by contacting What If We Finance for a home loan review.

Alternatively, you can also pay mortgage faster if you refinance or switch loans. You can ask your current lender for a better deal, negotiate the length of the new loan or weigh up the cost of lender’s mortgage insurance. 

But if you’re thinking about switching home loans to pay mortgage faster, make sure the benefits outweigh the costs.

Reduce the fees you pay

You can save thousands by finding a loan with no upfront fees or no ongoing fees. No upfront fees saves you around $600 (based on a typical application fee) and a $10 monthly charge saves you around $2500 in fees around the life of the loan.

If you are paying fees, contact What If We Finance to see how you can save potentially thousands.

Make extra repayments

Another way on how to pay off mortgage faster is to make repayments as if you had a loan with a higher interest rate. The extra money will help you pay mortgage faster. If you switch to a loan with a lower rate of interest, continue making the sane repayments you had at the higher rate. Additionally, keep making repayments at the higher rate even if interest rates drop.

Making extra repayments can be one of the most powerful tools when it comes to saving interest and costs. What If We Finance provides the following simple examples to help you understand how you can benefit:

  • You can save up to $40,907 by making extra repayments of $82 a month and reducing your interest rate by 0.50% pa.
  • You can save $5,769 by making extra repayments of $10 a month from the money saved by not paying $10 monthly ongoing fees.
  • You can save $54,003 by splitting your monthly payment in two and paying every fortnight. This equates to paying an extra $136 per month!

Use your offset or redraw facility effectively

What If We Finance has always recommended that you deposit all your savings and income into your home loan account and use an offset account and or redraw facility to use funds for future purchases. When choosing a loan, make sure that fees are not charged when using either of these facilities.

An average balance of $10,000 in an offset or in your loan account over the term of your loan and you can save $49,715 in interest payments or reduce the term of your loan by a further 2 years and 3 months.

Is it practical to pay mortgage faster?

Now that you know how to pay off mortgage faster, should you be paying off your loan as soon as possible? There is no clear-cut answer to this. The best option really depends on your money goals and your current financial situation. The decision is rarely a black and white one.

Let’s dive a bit into the advantages and disadvantages.

Pros of paying off your mortgage faster

There are many benefits to paying off your mortgage loans as soon as possible. To start, you no longer have to make any more monthly payments, providing you with the peace of mind knowing your home is finally yours. 

The extra cash originally reserved for a mortgage can easily go towards travel, hobbies, saving or investing. In other words, you are no longer tied to your mortgage loan.

Other pros include improving creditworthiness and saving money on interest.

  • Improving creditworthiness: Experts agree that closing your mortgage early has a positive impact on your credit score. By eliminating your mortgage early and closing the account in good standing, you become more attractive in the eyes of lenders. It also lowers your debt-to-income ratio.
  • Saving money on interest: Paying off your mortgage early means you save plenty of money on the interest that inevitably adds up over the years. That’s because, with each mortgage payment, you’re not just paying back your home loan, but you’re also paying interest on your loan’s remaining balance. You can save thousands of dollars in interest payments.

Cons of paying off your mortgage early

The only major disadvantage of paying off your home loan fast is that although it eliminates one bill, using the bulk of your disposable income on the mortgage could leave you short for dealing with an unexpected financial crisis or paying off other debt.

In other words, a mortgage will likely cost you less to hang on to than other types of debt with higher interest rates. Spending a large amount of money to pay off mortgage could also mean less money to put toward things like creating an emergency fund or renovating your home.

Pay Mortgage Faster with What If We Finance

As you can see there are several different options you can use to reduce your home loan and tips to pay off mortgage faster. Learning how to pay it off fast also brings forth many advantages to your finances.

Contact What If We Finance today for a brief consultation and we can show you how you can pay off your mortgage sooner.

Get updates and learn from the best

Subscribe To Our Newsletter

More To Explore

EXCELLENT
176 reviews on
Matthew B
Matthew B
2022-06-05
Looking at the reviews for What If We Finance, it comes at no surprise to see so many 5-stars. Spiro handled the mortgage part of my girlfriend and I purchasing our first home. He made himself available to us around the clock and ensured that we were across the entire process and felt as comfortable as possible. We're very fortunate to have gone about buying our first home with Sprio and we'd be more than happy to use him for future purchases and to refer on to family and friends. A big shout out to Agnes also who busily works away in the background and also does an incredible job. You guys are the best!
Read more
hari gowtham
hari gowtham
2022-06-03
Very happy with the results from Spiro from start to finish. Spiro and his team are very knowledgeable and have a very quick turnaround time. Couldn't be more happier with the service. Definitely my go-to person for upcoming purchase.
Read more
Gary Shekhter
Gary Shekhter
2022-06-02
Great broker and trustworthy. Honestly had seen 5 brokers and fund this wonderful guy. Who helped from start to finish fast and had our loan in no time at all. Thank you again champ you did an amazing job
Read more
Leonie Kemp
Leonie Kemp
2022-05-29
Thank you Spiro and Agnes for helping with the purchase of my first home. I needed to arrange finance quickly and Spiro did a fantastic job letting me know the best options for me and pushing to get the pre-approval so I didn't miss out on purchasing my home. Everything went very smoothly, thanks for helping make my first property purchase straightforward.
Read more
S S
S S
2022-05-28
Thank you Spiro and team for your help in financing the mortgage for the recent property purchase. Spiro provided timely advise, guided me on the process and was swift in processing the documents. His friendly attitude makes the process even better. Thank you once again.
Read more
Anita Naughton
Anita Naughton
2022-05-27
As a first home buyer I had very limited knowledge on what I needed to do. I searched for a broker and What if we finance stood out due to reviews. I had my first session with Spiro and never looked back! The whole process was seamless, I felt supported and could always connect with Spiro when needed. Spiro and Agnes are experts in what they do and I would highly recommended anyone looking for finance to choose What if we finance. I will be a lifelong customer and look forward to buying our next house with their support.
Read more
Mahmoud Al Kilzi
Mahmoud Al Kilzi
2022-05-25
Spiro & his team did a great job by getting my loan sorted in time. I would recommend them to family & friend. Great work guys much appreciated.
Read more
Rebecca Zeeman
Rebecca Zeeman
2022-05-20
Spiro and Agnes provided great help and advocacy in getting us our home loan. We felt they were always available and were super efficient in getting it all done on time! The process was so simple and without stress thanks them both.
Read more
Irish Azcuna
Irish Azcuna
2022-05-09
I can’t thank Spiro and Agnes enough for making my first home purchase so efficient, stress-free and seamless! If I could give more than 5 stars I would. As a first home buyer applying for one or the government’s schemes, my situation would have been so complicated that I never imagined being able to complete the process in such a short time. Spiro’s in-depth knowledge, invaluable and always-available support, and genuine willingness to help get me the right mortgage for my situation, made everything possible. His pragmatic advice even helped me decide on the right property for us, which would help us achieve our long-term goals. I highly recommend Spiro and his team. We will definitely engage their service again for our next property. They are the best!
Read more
Renee Briggs
Renee Briggs
2022-05-02
Spiro is reliable, has your best interest as his top priority and is fast to get great results. We wouldn't ask anyone else for their professional opinion- Spiro is the best in the business.
Read more