Your principal does not reduce during the interest-only period. These loans are usually for a set period (for example, five years). With an interest-only loan, you only pay the interest on the amount you've borrowed. This means repayments reduce the principal (amount borrowed) and cover the interest for the period. Most home loans are principal and interest loans. Paying both the principal and the interest is the best way to get your mortgage paid off faster. Let’s talk about where to put the 10 you’re saving every day. I think that with the information you’ll find in Pay It Down and your dedication to cutting down on spending, you’re on the right track to financial freedom. If your offset balance is always low (for example under $10,000), it may not be worth paying for this feature. First off, congrats on taking the first steps towards paying down your debts. This reduces the amount of interest you pay and helps you pay off your mortgage faster.įor example, for a $500,000 mortgage, $20,000 in an offset account means you're only charged interest on $480,000. Your offset account balance reduces the amount you owe on your mortgage. Consider an offset accountĪn offset account is a savings or transaction account linked to your mortgage. See what you'll save by making higher loan repayments. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative. Work out what features of your current loan you want to keep, and compare the interest rates on similar loans. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.Īsk your lender if there's a fee for making extra repayments. 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. Putting your tax refund or bonus into your mortgage could save you thousands in interest. Make extra paymentsĮxtra repayments on your mortgage can cut your loan by years.

By paying half the monthly amount every two weeks you'll make the equivalent of an extra month's repayment each year (as each year has 26 fortnights). If you're currently paying monthly, consider switching to fortnightly repayments. With no more debts to pay off, you get to experience what your paycheck actually feels. Here are some ways to get rid of your mortgage debt faster. Paying down debt requires a huge commitment of money and time. Paying off your mortgage early will save you money and take a financial load off your shoulders.

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