Paying back a mortgage can seem like an unforgiving, mountainous ordeal. The amount of money at play coupled with the long repayment times can seem insurmountable and forbidding, and even more so if you run into financial difficulties along the way. If you do, or if you simply want to pay off your home loan more quickly, it needn’t be as trying as you may think. Here are some top tips.

Larger Down Payment

Before you even think about applying for a home loan think about saving a little longer for your down payment. If you can boost it to 20% or more you will avoid having to pay private mortgage insurance (PMI), and will likely be able to secure a loan with smaller repayments. If you intend to pay your mortgage off quickly then the more you can lay out at the beginning, the quicker you’ll be able to achieve this. Gather together your funds, seek donations or loans from family and friends, and use some of our budgeting tips below to bump up your down payment, and reduce your costs and headaches later on. A larger down payment also reduces the overall interest you’ll incur paying back your home loan, so over time it really makes sense to hold back until you have as much as you think you can get.

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Extra Payments

If you can afford it, try splitting your monthly total in half and pay that bi-weekly instead – as there are 52 weeks in the year this adds up to 13 total payments rather than 12 (26 half payments a year) – so you won’t notice the difference month to month, but you’ll have made one extra payment a year. Another common tactic to pay faster and save money is to make one-off extra payments as and when you can afford to do so, for example, if you have had a tax refund or have inherited some money. Every penny you pay back sooner adds up to your total repayment and reduces the overall interest you pay on the entire mortgage. You’ll need to check out the flexibility of your home loan, as some lenders charge you to make extra payments. It’s best to investigate if the good outweighs the bad before taking any steps.

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Wise Up about Loans

Your home loan can be quite a complicated and detailed arrangement, so it’s best to get clued up and understand everything before you sign up for one. Likewise, it makes sense to shop around and find the best loan for you in terms of interest and arrangements. Spending a little bit of time on the internet will reveal that a number of brokers and lenders these days have clued into the importance of convenience and speed when it comes to the sometimes prickly subject of home ownership and the finances involved with the same. According to Lendi, no matter if you’re sitting in front of a computer in sunny Sydney or sipping tea in gloomy London, for today’s consumer, there is no shortage of helpful loan application tools, designed to make the whole process that little bit simpler and easier to comprehend. By getting a clearer understanding of all the different loan options available to you, you can then use that to inform your decisions going forward and help you secure the most favorable interest rate and payback program for your personal circumstances.

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Cut PMI

As mentioned above, the best way to avoid private mortgage insurance (PMI) is to save for a down payment of 20%. However, if you can’t afford to do that and have already obtained a home loan of over 80%, you’ll want to get rid of PMI as quickly as possible. If you maximize the payments you make at the outset to push the total outstanding loan down to 80% you can apply to ditch the PMI, depending on the terms you have agreed. Under 78% and by law the PMI disappears – although you do need to check to make sure you’re rid of it. Some lenders offer a service where you only borrow 80% with a 10% down payment, but you then have to borrow the remaining 10% as a secondary loan (or mortgage) – often from the same lender.

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Modify/Refinance Your Mortgage

If you’re going through tough times financially and need to tighten the belt, the very worst thing you can do is skip a mortgage repayment. This puts your home at risk. Instead, see if you are eligible for loan modification, which greatly reduces interest rates or increases the length of the loan period to make it more manageable.

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Fixed rate mortgages are great until rates drop. If your interest rate is higher than the current market rate you could investigate refinancing your mortgage. You’ll need a strong credit rating to secure a lower interest rate, and again, you will need to investigate the costs involved – although your monthly payments may be reduced, taking additional or new loans could make the loan period longer and lose you money in the long term.

Everyday Budget

Make savings across the board by cutting down on internet shopping, canceling subscriptions and gym memberships you rarely use and making your own coffee and lunch at work. These may seem like insignificant savings, but add them up into annual totals, and then into savings across your entire loan repayment period and they amount to a huge chunk of money you could be putting towards your mortgage.

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Knowledge is power, and no more so than when dealing with mortgage payments. It’s crucial to keep on top of your situation, even if your finances are in order and your credit score is good. Getting to grips with your home loan can save you money and bring you a brighter future.


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