How to Repay Your Home Loan Quickly

It sounds so easy: Apply for a mortgage and then make the repayments every month until it’s paid off. Right?

Unfortunately, if you pay only the bare minimum repayments shown on your mortgage documents each month, it will take you 30 years to repay. By the end of those 30 years, you will have paid almost as much in interest as the original amount you borrowed. 

Yet there are plenty of ways to repay your mortgage far quicker than the 30 years you signed up for on your documents. It’s just a matter of choosing any of a combination of tactics that work for your own financial situation and sticking with it until your mortgage is gone.

Here are some tips to help get you started:

Pay More Than the Minimum Payment

This sounds logical, but it’s surprising how many people don’t do this. Arrange for a direct debit from your regular transaction account for an amount slightly higher than the minimum payment due. Work on rounding up your payment to a nice even number. This will automate the payment and make it easier for you to remember how much your payment is each month.

Direct Debit Payments

Don’t rely on your memory to go into a branch and manually make your payments. You also shouldn’t rely on your memory to electronically transfer your mortgage payments each month. Instead, set up a direct debit repayment option that withdraws your payment from your transaction account automatically, either weekly, fortnightly or monthly.

This will also stop you from being charged any overdue fees or penalty interest rates if you happen to forget to transfer the money yourself by the due date.

Change Your Payment Frequency

Paying your mortgage monthly will mean you make 12 payments in a year. If you change your payments over to fortnightly, you’ll be making the equivalent of 13 monthly payments each year. This happens because there are 26 fortnights in each calendar year.

Just make absolutely sure the amount you make is calculated by dividing your regular monthly payment by 2. Then pay this amount. Don’t fall for the bank’s calculation of dividing your annual payment by 26. This won’t put you any further ahead.

Remember: Monthly payment divided by 2.

If you’re paid weekly, arrange to make your repayments weekly instead. You will still have the same benefit as paying fortnightly, as you’ll still pay the equivalent of 13 monthly payments each year, but it will make your budgeting easier to manage.

Remember: Monthly payment divided by 4.

Lump Sum Payments

If you receive a tax return or a bonus at work, pay a lump sum payment off your mortgage. You’ll be reducing your balance and reducing the amount of interest the bank can charge on your balance.

Switch Loan Products

If you’re not happy with your current mortgage, call your bank and ask about switching to an alternative loan product. You might want to fix your interest rate or switch your loan completely over to a basic variable home loan.

Your bank may charge you a small ‘switch fee’, but if it reduces your interest costs and makes it easier for you to repay your loan, this could be worth the hassle.