Over the first few years of your mortgage, it may seem that you are only paying interest, and the principal isn’t reducing at all. Unfortunately you’re probably right, as this is one of the unfortunate effects of compound interest. So you need to try everything you can to get some of the principal repaid early, then you’ll start to notice a difference.

Every dollar you put into your mortgage above the minimum payment attacks the principal. This means that, down the track, you’ll be paying interest on a smaller amount. Here are some tips to help you cut years off the term of your mortgage.

  • Talk to me about your repayments. If your loan repayment amount is calculated monthly, you can make significant savings by halving your monthly repayments and paying fortnightly instead. This method will result in you paying an additional month’s worth off your mortgage every year, reducing the principal faster, and the total interest payable.
  • Pay extra from the start. Regular additional repayments made right from the beginning of your loan term will have a much greater effect on the overall time and cost of your mortgage than starting five or ten years into the loan. Even if you are already more than five years into your loan term, you can still make a considerable saving by increasing your repayments now.
  • Keep your mortgage payments the same if interest rates fall. The extra money will go towards reducing your principal, which means you will pay less in interest and repay your mortgage sooner.
  • If you top up your loan to consolidate debt or buy a car, set it up as a separate loan and pay it off over a short (3-5 year) time-frame. I am happy to arrange top up loans for existing customers, and will help you structure it effectively.
  • Review your home loan regularly, especially whenever a fixed rate expires. Come back to me at every re-fix time (no charge), and I will help you review your home loan, and see whether we can make any small changes to help you pay it off more quickly.