1. PAY PER FORTNIGHT
If you're currently paying monthly, consider switching to fortnightly repayments. In fact, since interest is calculated daily, the more frequent payments you make, the more you could save in interest over the life of your loan.
2. MAKE EXTRA PAYMENT
Extra repayments on your mortgage can cut your loan by years. Putting your tax refund or bonus into your mortgage could save you thousands in interest.
On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.
3. FIND A LOWER INTEREST RATE
Work out what features of your current loan you want to keep, and compare the interest rates on similar loans. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative.
Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. See what to keep in mind when using comparison websites.
Switching loans
If you decide to switch to another lender, make sure the benefits outweigh any fees you'll pay for closing your current loan and applying for another.
If you switch to a loan with a lower interest rate, keep making the same repayments you had at a higher rate.
If interest rates drop, keep repaying your mortgage at a higher rate.
An offset account is a savings or 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.
For example, for a $500,000 mortgage, $20,000 in an offset account means you're only charged interest on $480,000.
If your offset balance is always low (for example under $10,000), it may not be worth paying for this feature.
Paying both the principal and the interest is the best way to get your mortgage paid off faster.
Most home loans are principal and interest loans. This means repayments reduce the principal (amount borrowed) and cover the interest for the period.
With an interest-only loan, you only pay the interest on the amount you've borrowed. These loans are usually for a set period (for example, five years).
Your principal does not reduce during the interest-only period. This means your debt isn't going down and you'll pay more interest.Source: Smart Money
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If you have difficulty with tax accounting, you can contact Allan & Co, we will help you out.
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