Five tips to get ahead on your home loan
We explore five tips to help you potentially pay off your home loan sooner.
For most of us, a home loan is the biggest financial commitment we ever make. Here are our top tips to help you get ahead on your home loan.
Look at options that can help you pay less interest
Transactional offset accounts are a flexible option for potentially reducing the interest you pay on your loan. Every cent you deposit into your transactional offset account goes towards reducing the debt on your home, while still giving you access to your money the same way your transaction account does.
A transactional offset account that allows you to link multiple accounts to the same loan is an option that can give you greater flexibility in managing your transactions. For example, you can set up different accounts for things like paying bills or for your everyday expenses. Any money sitting across these accounts works to offset the total balance of your loan and your interest is calculated on the net balance. This means you may be able to reduce the amount of interest you pay.
Our Everyday Offset account is one option if you’re looking for the ability to link multiple accounts to your home loan to help you manage your finances.
Access extra money when you need it
Some home loans give you the flexibility of accessing extra repayments you have made on your loan through a feature called Redraw.
Redraw can be a handy feature to make use of if you need to pay for unexpected expenses like repairs to your investment property or for renovations to your family home.
This means you can put extra money towards your loan to reduce your home loan balance, and therefore your interest payments, without losing access to that money if you need it down the track.
Pay your loan off fortnightly
Making more frequent repayments could help you chip away at your loan faster. There are 12 months in a calendar year, but 26 fortnights. If you make fortnightly repayments (paying half your monthly repayment each fortnight), over the course of a year you’ll make the equivalent of one extra month’s repayment, and your home loan will shrink quicker.
Not all banks automatically calculate their weekly and fortnightly repayments in this way, so make sure you speak to your lender about your repayment options.
Use our Home Loan Calculator to see what difference fortnightly repayments could make to your loan.
Consider splitting your loan
The appeal of a fixed rate home loan is that you know exactly how much your repayments will be. However, if you split your loan by fixing part of it and keeping the other part variable, you have the extra option of adding lump sum payments to your variable loan to reduce interest and help you pay it down sooner.
Splitting your loan could also give you access to some of the flexible features mentioned above like Redraw and Everyday Offset accounts.
Become budget savvy
When it comes to keeping on top of your finances, nothing beats good budgeting. The basics are simple: know how much you are earning and spending; monitor your budget carefully; resist temptations that will rock your budget; and, if problems with repaying your home loan arise, such as job loss or an unexpected health concern, don’t hesitate in contacting your bank to talk through your options.
Speak to one of our Home Lending Specialists today to find out more about how they can help you get ahead on your home loan.
This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. Commonwealth Bank of Australia ABN 48 123 123 124.