Maximise Your Repayment

Now that you’ve settled into your new home or completed the purchase of your investment property, it’s time to manage your home loan so that you pay it down as soon as you can, without making unnecessary sacrifices. Our mortgage expert is very experienced in providing you with the advice on how to maximize your repayment.

By making a few simple changes to the timing of your repayments, or the odd extra repayment here and there, you can greatly reduce the amount of interest paid and the time to pay off your home loan.

Make your payments more often

As interest is usually calculated daily on the balance of your loan, making more frequent repayments reduces the compound interest on the loan. One of the simplest and most effective strategies for reducing the term and cost of your loan (and thus your exposure should interest rates rise) is to make your repayment on a fortnightly rather than monthly basis. Split your monthly payment in two and pay every fortnight. You’ll hardly feel the difference in terms of your disposable income, but it could make thousands of  dollars and years difference over the term of your loan.

Make payments greater than the minimum required

Make sure your loan gives you the ability to pay extra (regular or ad-hoc). Making additional payments on your loan, big or small, is a real benefit. If your interest is calculated daily, extra funds have the immediate effect of reducing the loan balance and, therefore, the interest payable. If the right loan is set up from the outset, making extra payments should be very easy via direct debit/credit, ATM s or internet and phone banking.

Pay your expenses on your credit card and maximise the benefit of the offset account

Have your salary and all your savings deposited into your offset account to maximise the full effect of the savings potential. This will bring an immediate effect as it will reduce your interest payable on the loan balance and with every pay you will decrease the amount of interest charged. Pay for all your ongoing expenses such as groceries and bills using the credit card. Interest on the loan balance is usually calculated daily, this means that the longer the money stays in the offset account, the greater the savings you will get. Thus use your credit card on your monthly spending and then pay off the credit card just before the interest is charged to the account to maximise the savings.