[MoreMore Insights] Extra Repayments

If you have a mortgage, the idea of paying off your home loan in advance may be very attractive. Paying off your mortgage in advance can save you money and reduce the financial burden on your shoulders.

Why Making Extra Repayments for Your Mortgage?

Additional repayment of home loans is a simple and effective way to shorten the loan period. By doing so, you can also save thousands in interest. This is because the faster you pay off the loan, the shorter the time it takes for your loan principal to generate interest. You can make payments on a monthly basis, or you can make a lump sum payment whenever you can.

Under What Circumstances Can Make Extra Repayment?

Not every home loan allows for extra repayments, so it is important to check the terms of the loan before doing so. In general, variable rate loans have no restrictions on additional repayments.

Fixed rate home loans usually do not allow you to make additional payments. However, some lenders and products do allow additional payments, but there are restrictions on the amount or frequency.

Other Ways to Pay Off Your Mortgage Faster:

1. Refinance to Get a Better Rate.

If your current bank cannot offer you a better interest rate, then do a refinance. Banks only give new clients better interest rate and cash back, but not to their existing mortgage clients.

2. Use an Offset Account.

An offset account is a transaction account linked to your mortgage. Your offset account balance reduces the amount you owe on your mortgage. This reduces the amount of interest you pay and helps you pay off your mortgage faster.

3. Make Higher Repayments.

If you switch to a loan with a lower interest rate, but still keep making the same repayments you had at the higher rate, then you’ll pay off more of your loan without even realizing it.

4. Avoid Interest Only Loans.

Paying principal and interest is a good way to get your mortgage paid off faster. With an interest-only loan, you only pay the interest on the amount you've borrowed. Your principal does not reduce during the interest-only period. This means your debt isn't going down and you'll pay more interest.

Any questions about your mortgage? Contact the team at MoreMore Finance to obtain more mortgage tips.