A happy family who just moved to their new home.

Strategies to Help You Pay Off Your Mortgage Faster

If you are like most people, your home is your most significant investment. Property is a great asset, but repaying the loan can be a long commitment.

One of the most frequently asked questions we get here at Quantum Finance is, “How can I pay off my mortgage quicker?

Our mortgage brokers in Perth have compiled a list of some of the top strategies to pay off your mortgage.

Following some of these 12 tips can help you get out from under your mortgage faster.


1. Do Not Take on a Loan You Cannot Repay

While this advice comes a little after the fact, it bears repeating for many. Lending institutions will offer you the largest loan possible.

Many experts suggest that your loan should be no more than four and a half times your gross income. You may buy a house that is a bit smaller or with fewer bells and whistles, but you will be glad that you can manage the repayments and avoid defaulting on the loan.


2. Make Sure to Use a 100 Per Cent Offset Account

Offset accounts are a brilliant way to reduce the interest on your home loan. Your best bet is to get a 100 per cent offset account that allows more of the money you are saving to go towards reducing your interest.


3. Rounding Up Your Payments

Not every measure to pay off your mortgage is extreme. However, small changes can add up to large benefits over time. That is how rounding your loan repayment up can help. Take the odd amount and even it, so your loan repayment of $1,501 becomes $1,510 when rounded. Whether you round up to the next five or ten-dollar amount or higher, if possible, you are still chipping away at the loan. You will get used to paying the new amount, and it is unlikely that you will miss it in your monthly budget. You also have the option to adjust the amount should your circumstances change.


4. Use Windfalls to Pay Down Your Mortgage

If you get an unexpected sum of money, like from a bonus at work or an inheritance, put it towards paying down your mortgage. This idea may be a struggle for some. However, you are doing yourself a favour by reducing your loan in the long run.


5. Review Your Loan Regularly

While you do not need to obsess over the terms of your loan continually, take the time to review it with a financial expert every few years. Your broker may find better options exist with other lenders. Do not hesitate to speak with your bank about matching the lower rate if this is the case. If they are inflexible, you can change lenders and save money.

Signed mortgage contract and keys.


6. Switch Your Repayment Schedule to Fortnightly Repayments

Rather than making a single payment on your home loan every month, consider making two half-payments a month. The twice a month repayment schedule will not impact your budget, as the total amount repaid each month does not change. However, you will benefit by using this strategy because every year has 26 fortnights. So, you have the equivalent of making an extra payment each year without a change to your budget.


7. Consider Making Other Investments

Opting to invest money in other areas is not counterintuitive if you are trying to pay down your mortgage. Why?

Because as you build your investment portfolio, you are building wealth. In time you can use the profits from your investments to make a substantial dent in your mortgage. Remember, mortgages are a long haul and often require long term strategies to help pay them down. Your financial advisor can make suggestions regarding the best areas of investing for you.


8. Avoid Interest Only Loans

It may seem tempting to consider an interest-only loan. In the short term, you may see smaller repayment amounts and like the sound of the monthly savings.

However, you need to remember that the amount you pay for the term of the interest-only loan will not reduce the amount you owe on the principle of the loan. Once you need to make repayments for your principle, you will not be farther ahead. In fact, you are still responsible for the amount of your home loan.

**Please Note** Some homeowners have misconceptions regarding interest-only home loans. The reality is that you generally have three options at the end of an interest-only home loan:

  • Repay your loan with savings or investment money
  • Repay your loan by getting a new mortgage
  • Repay the loan after selling the house

*Remember* That your lender is not obligated to offer you any options at the end of your interest-free term.


9. Regularly Pay More Than the Minimum Repayment Amount

You can trim back the length of your mortgage by adding to the amount you repay each month. You do not need to double your repayment amount to do this. Adding 2/3 will make a substantial difference in repayment.

Here is how it works:

A $500,000 loan at 3 per cent over 30 years will require repayments of around $2100 per month. Calculate 2/3 of $2100, and you have $1400. If

the interest rates remain constant, you would need to pay $3500 per month to pay your loan off in approximately 15 years. Many homeowners prefer this option over financing for a 15-year term because if unexpected hard times occur, they can return to the original repayment amount with no penalties or refinancing.

A realtor showing apartment interior to a couple.


10. Plan Your Purchases Carefully

We all experience frustrating unexpected expenses from time to time. Your car breaks down, or you drop your mobile phone into a puddle of water, and you have no options except repairing or replacing the item.

If paying down your mortgage is your primary concern, you need to realise that other areas of your wants list may need to be paused. This includes big purchases like the massive TV set you have been eyeing or that holiday you and your partner want to enjoy, down to spending $40 a month on coffee or having an $85 manicure and pedicure every two weeks.

Of course, you still want to be able to enjoy life, so indulging once in a while is okay. Think of it like going on a diet. A treat now and then will not make or break the diet. However, a daily latte and cupcake will keep you from your goals.



11. Rethink How You Manage Your Money

Consider setting up a second account that you will use to make your repayments on your mortgage. If you like, use the account for all of your monthly bills, but make sure that this account has no easy bank card access.

If possible, have your employer directly deposit a set amount that will cover your mortgage repayment and any other bills you may choose to pay from this account. You may want to consider automatic payments as well.

By making the process of getting to your money more complex, you force yourself to pause and think before spending. If you make repayments set-it-and-forget-it, then you have one less thing on your to-do list.


12. Avoid Trying to Keep Up with the Joneses

It is difficult to feel content in your life when you scroll through social media and see the elaborate trappings others display. No one likes to feel as if they are somehow less-than others. However, life is not a competition. Also, remember that many social media images are skillfully manipulated, and all of the glamorous and gorgeous embellishments cannot buy peace of mind. Keep your eyes on your prize.

**Please Note** The material in this post is for informational use only. It does not constitute financial advice and is not intended to replace a consultation with a professional finance expert.


Gavin Harrigan

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With over 18 years in the finance industry, Gavin's wealth of knowledge relating to home loans is matched by few in Australia. This knowledge is reflected in his dozens of awards, including being inducted into the Plan Australia Hall of Fame. His qualifications include a Bachelor of Commerce from Curtin University for Applied Finance and Commercial Law and a Diploma of Finance and Mortgage Broking Management from AAMC Training Group.

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