Pay Off Your Home Loan Faster: 5 Simple Hacks

Helping people pay off their home loan faster is what I do every day, and when I get the call “Edwena, we paid off our home loan!” it is a GREAT day for them, for me and my team.

But how do you pay off your home loan faster than the 30 years the bank gives you?

5 Hacks to Paying Off Your Home Loan Faster

Have the right loan for your needs

You might be thinking ‘The ‘right’ home loan is just the one with the cheapest interest rate, right?’ but the cheapest, no-frills loan available isn’t necessarily the best loan for you! It’s all about finding the loan that COSTS you the least, and the interest rate is only one part of that.
The ‘right’ loan for you depends on what phase of life that you are in or how you engage with your money on a day-to-day basis.
Features such as a ‘100% offset account’ or an attached credit card, or fixed interest or dozens of other features all combine in a home loan, and those other features (and picking the right features for how you use your money) are just as important as the interest rate!
Like all your major expenses you should be checking every 2-3 years that your home loan matches your needs and is going to be suitable for the upcoming 2-3 years. We call it our ‘home loan review’ and we do it with all our customers every few years, but whatever you call it just remember to do it.
Earlier this year I helped a family refinance their home loan to a lender that suited their needs much better! The result was that they are saving $16, 174 per year from making the switch to a lesser-known bank.
That’s money they can use to improve their lifestyle and pay off their home loan faster, AT THE SAME TIME!!! If you need help just ask.

Check for sneaky charges made by the bank on your account

Double-check your account to see if you are paying any account keeping fees. Paying this fee each month may not seem like a big deal but paying a monthly account keeping fee or an offset account fee is just like paying a higher interest rate – ask yourself whether it is worth it to you and your family and whether this fee is giving you enough of a benefit. Is it REALLY helping you get to your goal of paying off your home loan faster, or is it actually slowing you down?
This is why it’s so important to regularly re-check that you’ve got the right loan for you and how you use your money! If you lack features you need then it will cost you, but also if you’re PAYING for features you don’t need, then that will ALSO cost you!

Make extra repayments regularly

If you think that making extra repayments doesn’t make much difference, or you really can’t be bothered making extra repayments then let me stop you right there!
Making extra repayments isn’t as hard as it sounds and it can make a massive difference to how soon you become debt free.
Remember that the bank wants you to give them back the money they lent to you and every bank offers the ability for you to automatically make additional repayments regularly.
If you’ve set up automatic direct debit repayments the easiest thing to do is increase the amount you automatically deposit onto your mortgage each month – even if it is only by $20 each week, it will make a difference. Obviously the more you pay extra, the bigger the impact, so if you can afford $50 per week extra then consider if that’s perhaps a better way to use that money than whatever you’re doing with it right now.
As you make extra repayments, the principal amount you owe to the bank decreases. Keep in mind that the majority of each repayment you make is actually INTEREST, and only a small amount is PRINCIPLE. But every EXTRA dollar you repay is actually going against the PRINCIPLE, which is the bit you’re trying to repay!
This means that over time you will pay less in interest (actually a LOT less in interest!) but also that you will have paid off your home loan faster than the anticipated 30 years.

Lump-sum payments

There are times in life when you will receive lump-sum payments for one reason or another. You perhaps get a tax refund, your work gives you a bonus, or you receive an inheritance. Adding these lump-sum payments to your loan will dramatically improve how quickly you are able to pay off your home loan.

Focus on paying off your home loan faster

Try this simple trick: Make a decision that paying off your home loan faster is a priority. It’s the number 1 thing you want to do! Focusing on paying off your home loan faster will mean that your subconscious will help you find and think about more ways to pay off your home loan faster.
It’s amazing what happens when you get your subconscious on your side. Suddenly expenses that you thought were ‘essential’ don’t seem so important, and you’ll find yourself having ideas about how to save money in ways that don’t really hurt your lifestyle at all, or at least not in ways that REALLY matter to you.
You may even find spare cash in the couch, at the bottom of your handbag or in a forgotten jacket pocket. If you decide that it’s important then you’ll start noticing spare cash in lots of places. Putting this money into your home loan instead of a separate savings account or spending it (like most of us do) will help you’ll save more in interest on the loan than you’ll earn with a separate savings account, and it’s a sure-fire to pay off the loan sooner. If your home loan offers redraw (as most do), you’ll be able to access the money in an emergency.