How to shave years off your home loan: Four simple ways borrowers can get out of debt quicker

One in two borrowers are worried they will never pay off their home loan, while 40 per cent fear carrying a home loan into retirement, new research has shown.

But despite concerns over carrying too much debt, four out of five borrowers are paying back more than is required.

1. Make bigger repayments 

Over the life of a loan, interest makes up the biggest component of the total amount paid.

At current rates, you can expect interest to make up about 40 per cent of the total amount you pay to the bank, and that’s if rates remain steady.

However, increasing the size of your regular repayments, especially early in the life of a loan, can significantly reduce the length of your mortgage. Borrowers should be taking advantage of low interest rates to get ahead.

2. Contribute lump sums

A large one-off payment, such as a tax refund or a bonus, will make a big impact if it’s put towards the loan instead of spent. Even small amounts can make a difference, and banks and third-party apps offer digital tools that help borrowers make extra contributions by rounding up transactions, with the balance paid into the loan account or high-interest savings account.

3. Take advantage of loan features 

Even small amounts can make a difference, and banks and third-party apps offer digital tools that help borrowers make extra contributions by rounding up transactions, with the balance paid into the loan account or high-interest savings account.

With lower repayments, you can save money faster, increasing your chances of paying off your loan early.

4. Get the right loan

Home owners should be negotiating the best possible deal with their lender. Be proactive with your lender or mortgage broker. Chat to them about your situation and get them to talk you through what your current home loan looks like and whether there are better options out there. Mortgage holders, especially those who have been with their lender for several years, should be reviewing their situation each year, 

Source - domain.com.au