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Pay Off Loan Faster
You may have got a great deal when you first took a home loan, but that does not mean it is still the best. Review your home loan regularly and look for lower interest rates, more appealing features, low or no fees that suit your needs. If you find a good deal on your home loan, you can consider refinancing.
Refinancing includes replacing your existing mortgage with a new one that is flexible and cost-effective for you. You can refinance your loan with your current lender, or you can switch to a new one that offers better rates and other features like an offset account, redraw facility, additional repayments, etc.
Top Reasons for Refinancing
People generally refinance their home loan for one of the following reasons:
- To get a lower interest rate that reduces your monthly repayments. You will save a lot of money over the long term.
- To reduce the loan term and pay it off quickly. You can reduce the term when you find lower interest rates.
- To access extra features l like additional repayments with no fees, offset account, ability to use home equity, etc.
- To convert to a fixed, split, or variable interest rate loan for better security and flexibility.
- To get cash out and purchase another property.
- To consolidate existing loans to your home loan as interest rates are generally lower for it.
If you can pay off your loan quicker than expected, it will provide financial stability and reduce a lot of stress. You will pay less interest and save money in the long run. Refinancing is a great way to reduce your loan term, and there are other effective ways to do so too. In this blog, we will look at some hacks to pay off your home loan quicker than the original term.
Hacks To Pay Off Your Loan Faster
1. Refinance to a lower interest rate or a shorter-term
One of the easiest ways to pay off loan quicker is by refinancing your existing loan. You can get a lower interest rate and save money. Also, to finish your debt quickly, you can refinance to a shorter loan term. When you go for a 15-year term instead of a 30-year one, you will have to make higher monthly repayments, but you will pay lower interest overall.
Some people think they will have to pay double each month by switching to a 15-year loan, but that’s not true. The monthly repayment for a 30-year loan of $200,000 at a 4% interest rate will be $955. Now, if you refinance it to a 15-year term, your monthly payment will be $1479, far less than double.
Before making your decision, you can use REFINANCE CALCULATOR to see how much money you will save through refinancing.
2. Make fortnightly repayments
You can try splitting up your monthly repayments in half and make 2 fortnightly payments monthly. You will spend the same amount each month, but instead of 12, you will make 13 monthly repayments in a year time. So, even without knowing, you will make one extra payment each year. Make sure to confirm with your loan provider if they accept fortnightly payments. Another thing you can try is paying extra each month towards the principal. This will help pay the loan off quicker without being locked to a fixed monthly payment. Make sure the extra money goes to the principal and not next month’s payment.
3. Round up your monthly repayment
Another simple way to reduce your loan term and pay it quicker is by rounding off your monthly repayment. If your payment is $820, you can pay $900. You won’t take a big hit to your budget, and the extra money will help pay off the loan faster. So, when you plan your next repayment, try to round it off to the next multiple of 100.
4. Use bonuses and unexpected income towards loan repayment
Apart from your fixed monthly repayment, you can use any unexpected income or bonuses towards loan repayment. If you get a bonus at work, holiday bonus, tax returns, money from family members, credit card rewards, etc., use it to pay off the loan. This will help you finish the debt quickly.Making use of such unexpected income won’t hurt your budget, and you will get to make extra payments towards your mortgage.
5. Review your home loan and request a better rate
Talk to your loan provider regarding loan review. This option is offered when you make a lump payment for the principal amount. You can choose it if you receive inheritance money or any other big payment. The amount you pay will be deducted from the principal, and the lender will change the total balance of loan and leave the same remaining term.
Your monthly payment will go down, but you can keep paying the previous amount to finish off the mortgage quicker. Not all loans can be recast, so discuss this with your lender. Confirm the review fee and how much money can be recast.
6. Consider a flexible term loan
The most common options are 15 or 30-year loans, but there are many lenders that offer flexible term mortgages. If you are confident you can pay high amounts each month, go for a shorter loan term.
Even while refinancing, try to get a shorter-term loan because you can pay it off quicker while saving a lot of interest money. If you are unsure about what term to choose or if you’re getting the right interest rate, speak to our experts to know everything in detail.
Summing Up
Many homeowners want to finish off their home loan quicker for a variety of reasons. Some want to reduce interest payments, so me want to end the pressure of monthly repayments, while some want better financial stability.
Whatever your reason maybe there are many ways to pay off your loan quicker than the fixed term. In the above blog, we read about the best hacks to pay off your loan faster. Consider some of these ways and finish your debts sooner.
NG Loans offer the best loan services and will assist you in refinancing to a shorter-term and a reduced interest rate. Book an appointment now and get started as soon as possible.
