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7 Clever ways to pay off your mortgage faster

Grow My Money LogoGrow My Money LogoGrow My MoneyNov 07, 2023
couple paying off their mortgage fastercouple paying off their mortgage faster

Paying down your mortgage can be daunting, but it doesn’t have to be. With the right strategies and tools, you could pay your mortgage off quicker and save thousands in interest payments. This blog post will explore seven easy hacks to help you quickly and efficiently reduce debt.

1. Switch from interest only to principal and interest repayments

If your mortgage is an interest-only (IO) loan, you are not paying down any of the principal balance of your loan, only the interest each month. By switching to a principal and interest (P&I) loan, you can begin to also reduce the outstanding balance of the loan so that you can repay the loan faster.

2. Switch to fortnightly payments

One of the most effective strategies for paying off your mortgage quicker, if you have a P&I loan, is to set up fortnightly payments. By doing this, you will make one extra payment each year without having to change your budget or dip into savings. By paying half the monthly amount every two weeks you'll make the equivalent of an extra month's repayment each year (as each year has 26 fortnights). This lets you pay off your mortgage faster and save on interest payments in the long run.

3. Round up your payments

Another way to pay off your mortgage faster, if you have a P&I loan, is by rounding up each monthly payment with an additional amount. For example, if your monthly payment is $800, round it up to $850 or even $900. The extra money will go straight towards the principal balance of your loan, reducing the amount of interest that accumulates over time.

4. Make lump-sum payments

If you receive a bonus or a large tax refund during the year, use it as an opportunity to make a lump-sum payment towards your mortgage principal balance if you have a P&I loan. This can significantly reduce the amount of interest that accumulates over time and shorten the length of your loan term by several years—saving you thousands in the long run.

5. Utilise online tools

Several online tools available today can help streamline and automate many aspects of repayment on home loans—including setting up fortnightly payments or making lump sum payments directly from a bank account when funds become available. Utilising these services can help ensure that you never miss a payment while also tracking progress towards repayment goals over time.

6. Find a lower interest rate

If you want to find a loan with a lower interest rate, research what features of your current loan you want to keep and compare the different interest rates offered for similar loans. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative. Comparison websites can be a great tool for users who want to save money and time by exploring different options, but they can also be businesses that make money through promoted links and may only cover some of your options. Here’s what to keep in mind when using comparison websites.

7. Refinance your loan

Refinancing is another great way to reduce both the length and cost of repayment on home loans. Taking advantage of lower interest rates or switching from a variable-rate loan to a fixed-rate loan, if the interest rate is lower, could significantly reduce monthly payments and total repayment costs over time - allowing for significant savings in both short-term and long-term scenarios.

Paying off a home loan isn’t always easy, but it’s possible with strategic planning and creativity. Switching to fortnightly payments, rounding up monthly payments, and/or making lump sum payments on your P&I loan when possible can help you achieve your financial goals. Likewise, comparison shopping interest rates, utilising online tools for automated tracking, and refinancing loan terms can help homeowners quickly pay down their mortgages with minimal hassle while saving thousands in interest along the way.

Whether you are able to take advantage of any or all of the above will depend on your personal circumstances so it’s important to speak with a licenced financial adviser who can provide tailored advice appropriate to your individual objectives, financial situation or needs.