How to reduce interest and pay your home loan off faster

Buying a home is one of the biggest financial decisions you are likely to make. Once you have a property to purchase, here are some handy tips to reduce the interest you’ll pay on your home loan. 

Owning property has always been part of the great Australian dream. However, home ownership often comes with a long-term repayment plan, and incurring interest. While it can seem like a big responsibility, there are steps you can take to enjoy the security of homeownership and greater financial freedom by reducing interest expense on your home loan.

In this guide, we look at strategies to reduce the interest you pay and pay off your home loan faster. Remember to consult a qualified financial advisor for personalised advice to ensure the following aligns with your financial situation.

7 Ways to Pay Your Home Loan Off Sooner

1. Change to fortnightly repayments

Switching your repayment frequency can accelerate how fast you pay off your home loan. By making 26 fortnightly repayments instead of 12 monthly payments – you make one additional monthly payment each year. This can make a difference to the total interest you will pay over the life of the loan. 

2. Open an offset account

An offset account is linked to your home loan and acts like a regular transaction account. Interest charged on the balance of your loan is usually calculated daily by lenders. However, any funds in your offset account reduces your loan balance and as a result reduces the interest expense charged by the lender.

For example, if you have a home loan with a 100% offset feature and your home loan limit is $500,000 should you have $25,000 in your offset account, you'll only be charged interest on a loan balance of $475,000 ($500,000 - $25,000).

Consider adding an offset account to your home loan. Maintaining a higher balance in your offset account will reduce the interest charged on your home loan, allowing you to pay it off sooner.

3. Increase repayment amount

If you have a variable interest rate, adding even a small amount to your regular minimum contracts monthly repayments can directly reduce your principal and save you interest in the long run. Consider setting up a regular schedule for extra payments. 

4. Consolidate debts

If your home loan interest rate is lower than your other debts, consider consolidating them into a home loan but over a short term so that you can take advantage of the lower interest rate without stretching out the time to pay the consolidated debt off.

5. Add lump sums

If you have a variable interest rate, bonuses, tax refunds, inheritances, and other one-off payments are great opportunities to make lump-sum payments. This can greatly reduce your principal and shorten your loan term.

6. Refinance with a shorter term

If your financial situation allows, refinancing to a home loan with a shorter term can reduce the total interest you pay. Consider regularly reviewing your home loan and refinancing when the higher repayments fit within your budget. 

7. Earn 100,000 Qantas Points every year

Refinance or purchase one or multiple properties with Qantas Money Home Loans, and you'll earn 100,000 Qantas Points every year*. These Qantas Points can be used for flights, hotels, food and wine, shopping and more, so the money you save on adventures can be put towards your mortgage.

Remember: Consistency is key. By reviewing and implementing your payment strategies, you could work your way towards a mortgage-free future sooner rather than later.

The Benefits of Paying Off Your Home Loan Faster

Paying off your home loan brings both financial freedom and peace of mind and you can consider putting your money towards holidays, investments and other life goals.

Here are some other reasons to accelerate your home loan repayments:

• Pay less interest: The longer you repay your loan, the more interest you accrue. Paying off your loan faster can make a big difference in reducing the total interest you pay on your home loan

• Financial security: Owning a home outright means you're free from monthly home loan repayments and can put your money towards investing and savings

• Peace of mind: A home loan is often the biggest debt we take on in life. Once you’ve paid off your home loan, you’ll enjoy the financial freedom that comes with not having to make regular home loan repayments 

• Earlier retirement potential: Imagine if the funds from your home loan repayments went towards savings and other investments helping to boost your retirement.

Considering a Qantas Money Home Loan? 

You’ll get 100,000 Qantas points every year for the life of your home loan*, competitive rates, an easy application process, and help when you need it – it’s the home loan that comes with a holiday every year.

This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.

Credit is provided by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL/Australian Credit Licence 237879. Eligibility criteria, T&Cs apply. This product is only available for Qantas Frequent Flyer members. All lending interest rates are subject to change. Fees and charges may be applicable and can be found on the Rates & fees page online. Refer to T&Cs for important information about comparison rates. *Members will earn an annual bonus of 100,000 Qantas Points which accrues three months after the settlement anniversary of their Qantas Money Home Loan up to 30 years, provided the loan is in compliance with the Qantas Money Home Loans Points Eligibility Policy, not in arrears or default and the loan is not the subject of hardship relief or assistance.