Settling your mortgage might seem like a distant achievement, especially with standard durations ranging from 25 to 35 years. But what if you could achieve financial independence from your mortgage sooner? Making intelligent adjustments could lead to substantial savings in interest and significantly reduce your loan term.

Extra repayments might not always be feasible, especially with the rising cost of living. However, an offset account can help reduce home loan interest and pay off your loan faster while still allowing you access to your savings.

An offset account works by linking your savings to your home loan. The interest paid is equal to the balance in the account. For example, if you have a home loan of $500,000 and $50,000 in an offset account, your interest will be calculated based on a loan balance of $450,000.

The Complete Home Loan from Bendigo Bank provides 100% offset accounts for both fixed and variable rates, giving you the benefits of an offset account regardless of your loan type.

Increasing the amount you pay each repayment period is a simple way to shorten the time it takes to pay off your mortgage. Additional repayments reduce the principal, which lowers the balance and, consequently, the interest you pay over time.

Small changes can make a big difference. Use Bendigo Bank’s repayments calculator to explore different repayment options. For example, with a 30-year $500,000 loan at a 5% interest rate, an extra $100 per month could cut your mortgage term by 2 years and 4 months. If you increase that to $100 every fortnight, you could be mortgage-free 4 years and 8 months sooner.

If you receive a lump sum of money, such as a bonus, inheritance, or gift, consider putting it towards your mortgage. For instance, making an additional payment of $50,000 towards your $500,000 mortgage in the 15th year could potentially save approximately $48,064.57 in interest and shorten your loan duration by 3 years.

A redraw facility allows you to make extra payments on your loan and withdraw them later if needed. This option provides flexibility while helping you accelerate the repayment of your loan.

With a redraw feature, you can withdraw any additional payments made above one repayment if necessary. A higher redraw balance reduces the interest you pay on your loan. For example, if you have a $300,000 home loan with monthly repayments of $2,000, and you’ve paid an extra $500 each month for six months, you can redraw $1,000 if necessary. While you don’t earn interest on additional repayments, they reduce your home loan interest.

Securing a lower interest rate can accelerate your loan repayment by reducing your monthly payments, allowing you to make extra payments towards the principal. For instance, if you borrow $500,000 with a 5% interest rate, your monthly payments would be $2,685. Lowering the rate to 4.5% would result in a $151 decrease in your monthly repayment. You can use these savings to make additional principal payments, speeding up the repayment of your loan.

If you’re serious about paying off your home loan faster, consider a Bendigo Bank Home Loan Health Check. We’ll take the time to understand your circumstances and goals to identify the best strategies for you. This free service is available to anyone, whether you’re a Bendigo Bank customer or not. Find out more about Bendigo Bank’s free Home Loan Health Check service.

Not sure what home to look for? Explore our current listings here, or for tailored support, get in touch with our team at Createvic Real Estate.

Source: Bendigo Bank – Pay Off Home Loan Faster