30 January 2016
Nick Reade, Chief Executive BankSA
Making extra repayments is obviously a fantastic way to reduce home loan debt, but many people tend to make it a lower priority due to the other financial pressures they face in their daily lives.
However, what many people also tend to forget is that by making extra repayments on your home loan, you could save thousands of dollars in interest.
For example, let’s say you have a $300,000 home loan at a 5.0% variable interest rate, which you are due to repay at around $370 per week over 30 years. Even if you only pay an extra $50 per week, you would cut almost seven years off the life of your loan and save more than $73,000.
To learn more, there are numerous online calculators now available to help you do the sums and quickly illustrate just how much you could save by paying more than the minimum home loan repayments.
Using a 100% mortgage offset facility is another great way to help you save on the amount of interest you pay, and in turn, reduce your home loan faster.
An offset account is a savings account that reduces the interest you pay on your home loan, because your savings are deducted from the balance of your loan before interest is calculated and charged. In other words, the more you save in your offset account, the less interest you’ll pay on your home loan.
This is why many people choose to have their salary paid directly into their offset account to maximise the balance for as long as possible, while retaining unrestricted access to their funds in their offset account.
So small measures can certainly make a big impact, and ultimately help you shave years off your home loan and a huge amount of money along the way.