Making extra repayments on your home loan can help reduce the amount of interest you pay over the life of the loan, and can have a significant impact on how quickly you pay off the loan. In this article, we’ll provide an overview of how to make extra repayments on your home loan and the advantages of doing so.
1. Calculate the impact of extra repayments:
Before you start making extra repayments on your home loan, it’s important to calculate the impact it will have on your loan. The first step is to use an online mortgage calculator to enter the details of your loan, including the amount borrowed, the interest rate, and the repayment period. Once you’ve entered this information, the calculator will show you how much you’ll save in interest if you make extra repayments.
2. Set up a regular payment plan:
Once you’ve calculated the potential savings from making extra repayments on your home loan, you can set up a regular payment plan. You can either make the extra repayments in regular instalments, or make a single, larger payment at the end of the term. It’s important to remember that it’s better to make regular payments, as this will help you pay off the loan faster.
3. Consider refinancing your loan:
Refinancing your loan can be a great way to make extra repayments on your home loan. Refinancing involves replacing your current loan with a new one, usually at a lower interest rate. This can help reduce your monthly repayments and help you to pay off your loan faster.
4. Make extra repayments when you can:
If you’re unable to refinance your home loans, or if you’d prefer to make extra repayments on your own, you can do so whenever you have the funds available. This could be when you receive a bonus, tax refund, or other lump sum payment.
5. Make use of your redraw facility:
If your loan has a redraw facility, you can use this to make extra repayments. A redraw facility allows you to access the extra repayments you’ve made, in case you need to use them for an emergency.
6. Take advantage of bonus interest savings accounts:
Bonus interest savings accounts are a great way to save money for making extra repayments on your home loan. This type of account gives you the option to deposit and withdraw funds, as well as earn bonus interest.
Making extra repayments on your home loan can have a significant impact on how quickly you pay off the loan and how much interest you pay over the life of the loan. There are several options available to help you make extra repayments, such as refinancing your loan, making extra payments when you have the funds available, using a redraw facility, and taking advantage of bonus interest savings accounts. It’s important to remember to seek professional advice before making any decisions about extra repayments on your home loan.