How To Pay Off Your Mortgage Faster

Most people think that paying off your mortgage before the 30-year term is up is impossible. I totally believe that this is not true. In fact, it is much easier than many of us are lead to believe. All you need to do is choose one or more of my simple strategies outlined below and apply them to your own home loan. With some diligence and persistence, you too can banish your home loan forever.

Find a cost competitive mortgage

The cost of a mortgage is not just the interest rate you pay, fees and charges are really important too. This is why you should look at the comparison rate as well as the interest rate. The comparison rate reflects the actual cost of the loan as it takes into account all the fees and charges as well as the interest paid over the entire life of the loan. It is rare that the advertised rate and the comparison rate are the same. So make sure you look at both. There is no point in having a low interest rate if it associated with heavy fees.

If you already have a mortgage you should take the time every year to check you are getting the best interest rate. All it takes is a quick look on some of the financial comparison websites to see what rates are out there, and a quick call to your bank to see whether they can improve on the current rate you are paying. I did this last year and got a 0.5 percent reduction in my mortgage interest rate on the spot. I estimate this interest rate reduction has saved us approximately $50,000 over the life of our loan tax-free, all for the cost of one phone call to my bank.

If you already have an existing loan, and your current bank won’t give you a better rate, you might want to look to change loans. The key is to make sure the benefits of the switch stack up after taking into account any fees and charges you might incur for exiting your current loan. Make sure you know your numbers!

Get the right features on your home loan

There are 3 features that really help you pay off a home loan quickly:
(1) Unlimited extra repayments without restrictions or fees.
(2) Redraw facility - gives you the freedom to access your extra repayments. This means you can withdraw the extra repayments if you need access to the money. Watch out for any fees that may be involved on redraws.
(3) 100% offset account - this account allows you to reduce the amount of interest you pay on your loan by placing money in a savings account linked to that loan. Make sure it is an 100% offset account to maximise the benefit. Click here if you would like to know exactly how these accounts work.

The above features enable you to make extra repayments and access those payments should you ever need the money. If you want to pay off your mortgage faster, the power of making extra repayments is huge. Each extra repayment you make reduces the capital value (principal or loan amount) of the loan which means that over time you will be paying interest on a smaller amount. That means your interest bill is growing at a smaller rate and again each repayment knocks off more principal. In money terms, an extra repayment of just $100 per month (roughly $25 per week) on an average $400,000 mortgage will cut close to $42,000 off your total interest bill and nearly 3 years off your home loan (using an interest rate of 5%). Extra repayments can also give you a buffer when, inevitably, interest rates start to rise again. To find out some strategies for making extra repayments click here.

Paying off your mortgage faster can be a good investment strategy. I can help you decide whether paying off your mortgage faster is the right strategy, or whether an alternative strategy would be better for you. Contact me here if you would like to know more or to organise a coffee and a chat about your financial circumstances.

I hope you found this post helpful. Please let me know in the comments.

Kind regards,


Shelley Marsh


Disclaimer: This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. It does not represent and is not intended to be personal advice.  Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.  We strongly suggest that you seek professional financial advice before acting.