Don’t set and forget your home loan repayments. One of the most effective ways to pay down your home loan faster is to make additional payments. Regularly paying a little bit extra or making lump sum payments will have a significant impact on lowering your loan.
Check out this example:
Five years into paying off his $300,000 home loan, Sam decides to up his $1,430 monthly repayments by an extra $250. By doing so, Sam will shave five years, eight months off his loan term and save $39,562 in interest. It’s an impressive saving, considering he’s only paying around $60 extra each week. Finding the extra $60 to put on his home loan was easier than he thought – he now makes his lunch four days a week instead of eating out.
Paying a lump sum can also bring good savings. Let’s say Sam receives a tax refund and a work bonus that totals $20,000. He decides to put it towards paying off his loan. He’ll make a $31,000 interest saving and reduce his loan term by three years.
Inspired to put some extra cash on your home loan? Let us know, and we’ll check that your loan enables you to make extra repayments without penalty. Fixed rate loans often restrict extra repayments and place limits on the total amount you’re allowed to repay.