7 tips to save & pay off your loan sooner
Your home loan can be one of your biggest monthly expenses, so we thought it might be helpful if we share our top tips for how to pay it off sooner.
A series of small changes to your current habits, applied consistently over time, could put you on track to reach that $0 mortgage goal sooner! Our team suggests 7 easy ways for you to boost your savings, to put towards that home loan.
Tip 1: Make a plan you can stick to
Rather than making extreme changes to your lifestyle and spending habits, focus on a range of savings strategies that will be sustainable, so you can apply those savings to your home loan. And stick to it too; don’t just make quick adjustments that you revert back to later on. Easy things to consider might be cancelling those streaming subscriptions you’re not using or cooking for yourself more often rather than ordering online. A simple saving of $23 per week could reduce your home loan by 2.4 years.
Tip 2: Automate & separate
Setting up regular automatic transfers of your savings and extra home loan repayments can help you. By automating, you can move the money to where it needs to go before you have a lapse in willpower and spend it! Transferring those extra funds to an offset account, may also help you save interest on your loan.
Tip 3: Create a budget & regularly track your progress
Tracking what you actually spend is the only way to get an accurate picture of your finances. Create a spreadsheet, use the MoneySmart budget planner or use the budgeting tool in most good banking apps to categorise your spending and identify where you can cut back to meet your savings goal. Keep an eye on your progress each week to stay motivated and reinforce good habits.
Tip 4: Check your current home loan rate
Reviewing your home loan every year or 2 with your HoLo team may help you find ways to save on fees, or loan features you don’t need, or even reduce your interest rate with a little push. We’ve saved our clients on average $3,892 this year through this tip.
Tip 5: Consider paying your loan fortnightly
It may not seem like it would make much of a difference, but by dividing your monthly loan repayment into 2 and paying that amount each fortnight into your loan or offset account, means you end up making an extra monthly loan repayment each year (because 26 fortnights equals 13 months…and we know there are only 12 months in a year). This can reduce your home loan by 4.7 years.
Tip 6: Make lump sum payments
Rather than spending your tax return or annual bonus, opt to use that cash to make an extra repayment on your home loan. Spending it is tempting, but remind yourself that any additional lump sum payments can reduce your total home loan repayments and the length of time it will take to own your property outright.
Tip 7: Use the membership & reward programs
There are a heap of reward and membership programs that offer lots of little savings and benefits. All those savings can add up over a whole year. Think of airline Frequent Flyers, grocery stores, Royal Automobile clubs and even some banks have a few programs. Just add those savings to your home loan or offset account to get the extra benefits.
If you’d like to know more, book an appointment or contact us.
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