Monday 17th June 2019

Common home loans: why and how to repay them quicker

Common home loans: why and how to repay them quicker

Finding the right home loan and the best way to pay it off
can seem insurmountable alone. But with the help of an experienced broker, it’s
much easier finding terms that will suit you. Read on for our guide on why and
how to repay your home loan quickly.

The most common home
loans

It’s easy to see why it can be intimidating picking the home
loan that suits your situation when there’s so much choice! To help, here’s a
rundown of the most common home loans:

Principal and
interest loans

These are often standard, with borrowers making regular
payments against the amount loaned, including interest charges, over a
25-30-year period.

Interest only loans

These require payments to cover the interest of the loan
only. The actual amount you borrow will only reduce with extra payments.

Within both these loan products, there can be a variety of
different interest rates, including:

  • Variable
    interest
    – the rate can go up or down in line with cash value or lender
    terms.
  • Fixed
    interest
    – interest will remain unchanged over a fixed time (usually 2-5
    years).
  • Split
    loan
    – this is a combination where part of your rate is variable, and part
    is fixed.

Why repay it quickly?

Once you have secured the right home loan and purchased your
dream property, it can be tempting to rest on your laurels and worry about
repaying your debt later. The Australian Investments and Securities Commission
shows this is a common mistake – repaying your loan as quickly as possible will
often save you money in the long run.

The larger your loan, the more interest you’ll pay on the
principal debt, and if you ignore or fail to keep up with your payment
schedule, you’ll start to struggle.

How to repay your
home loan quickly

  • Find a
    cheaper interest rate
    – shop around to find an interest rate on a home loan
    that seems within your means to pay off as soon as possible.
  • Make
    larger or more regular repayments
    – this reduces the length of your debt.
    Be sure to check if any extra payments incur a transaction free.
  • Plan for
    speed
    – the key to good financial health is planning. If you don’t think
    you can afford the repayments, you should speak to a financial specialist who
    can offer guidance on the next steps.

For more information on loan repayments or finding the right
home loan, contact our team today!