Imagine a life without debt.<\/strong><\/p>\n Sounds fanciful? It doesn\u2019t have to be.<\/p>\n Here are some surefire ways that could help pay down your home loan debt.<\/p>\n Imagine a mortgage-free life. Picture: realestate.com.au<\/p>\n<\/div>\n Making more \u2013 or larger \u2013 repayments than what you\u2019re required to seems like a bit of a no-brainer when it comes to shedding your debt sooner. But do you know just how much you\u2019ll save by doing so?<\/p>\n AMP head of sales and marketing Glenn Gibson says making small additional payments will fast track your path to financial independence. Using a $500,000 home loan with an interest rate of 3.99% and a 30-year term as an example. \u201cIf you are paying monthly and you increase your repayments by $250 per month, you could actually save more than $60,000 in total interest over the full loan term and cut just over four years off your home loan,\u201d Gibson says.<\/p>\n \u201cIf you were to increase that to an extra $500 per month, you could save more than $100,000 and reduce your loan term by around eight years.\u201d<\/p>\n Don\u2019t be tempted by the smaller repayments you\u2019ll initially be required to make if you select an interest-only home loan.<\/p>\n Paying off only the interest means you\u2019re paying none of the actual loan back, and you\u2019ll eventually be required to play catch-up.<\/p>\n For example, based on that $500,000 loan, if you chose to pay both the principal and interest, you\u2019d repay around $2384 per month. However, if you chose an interest-only period of five years, you would pay around $1662 per month for the first five years, but then be required to pay $2636 monthly for the next 25 years. Over the course of the loan, you would end up paying about $32,000 in extra interest, by choosing interest-only.<\/p>\n This shows that it is well worth making the principal and interest payment from the get go.<\/p>\n Paying off only the interest means you\u2019re paying none of the actual loan back. Picture: Getty Images<\/p>\n<\/div>\n If you\u2019re currently making your home loan repayments monthly, try switching them to fortnightly, or even weekly, to match your pay cycles.<\/p>\n In practical terms it means you\u2019ll make an extra repayment every so often, without even realising it, and Gibson says you\u2019ll be staggered at just how much you\u2019ll save.<\/p>\n \u201cUsing the $500,000 loan example again, your normal monthly repayments are approximately $2380. But if you were to make fortnightly loan repayments of $1190 you could save around $50,000 in total interest over the term of the loan and help reduce the term from 30 years to approximately 26 years,\u201d he says.<\/p>\n All loans<\/a> are not created equal.<\/p>\n For example, using a credit card \u2013 which is effectively a small loan \u2013 will attract a significantly higher interest rate than larger loans like your home loan.<\/p>\n If you are only paying the minimum repayments on your credit card each month, then consolidating your credit card debt and other debts into your home loan, may help slash the interest you\u2019re paying.<\/p>\n Thinking of refinancing?<\/strong><\/em><\/p>\n \u201cThe key to making this work is to cancel any credit cards you don\u2019t need once you make the transfer, and then increase the amount you pay each month off your home loan to be the total you were paying across all your loans,\u201d Gibson says.<\/p>\n \u201cBy making the same level of repayments of the combined loans and credit cards into the home loan, you will reduce the total interest you are charged.\u201d<\/p>\n Ready to play the long game?<\/p>\n The humble smashed avo has unwittingly become a pawn in the housing<\/a> affordability debate, but there\u2019s merit to the notion that making small sacrifices will pay off in the long run.<\/p>\n It pays to make your own smashed avo on toast. Picture: Getty Images<\/p>\n<\/div>\n Gibson says something as small as skipping that takeaway coffee every day and putting that money towards paying off your debt could be worth the sacrifice.<\/p>\n \u201cLet\u2019s say a coffee costs $5 and every fortnight you were to skip five coffees and paid $25 each fortnight off your home loan. Over the term of a 30-year, $500,000 loan you would save more than $15,000 and possibly cut more than a year of repayments off the length of the loan,\u201d he says.<\/p>\n Offset accounts are a great way to reduce the amount of interest you\u2019re charged on your debt.<\/p>\n Offset accounts are a great way to reduce the amount of interest you\u2019re charged on your debt. Picture: Getty Images<\/p>\n<\/div>\n An offset account is a bank account linked to your home loan, with the amount of money in the account used to cut down your interest repayments. For example, if you have $100,000 left on your loan but $20,000 in your offset account, you\u2019ll only be charged interest on $80,000.<\/p>\n In the end, anything you do to either increase what you\u2019re paying off your loan, or decrease what you owe, is going to help you become debt-free sooner.<\/p>\n If you\u2019re unsure about which approach is best for you, consult a financial advisor<\/p>\n It\u2019s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what\u2019s right for you. This information hasn\u2019t taken your circumstances into account. <\/em><\/p>\n
\n <\/p><\/div>\n Realestate au <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"![\"23-25](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/08\/25141745\/pool-by-canal-home_800x600.jpg?resize=800%2C600&ssl=1\")
<\/p>\nMake extra payments<\/h2>\n
Pay the principal not just the interest<\/h2>\n
![\"woman](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/08\/25141543\/woman-banking_800x600.jpg?resize=800%2C600&ssl=1\")
<\/p>\nChange your payments to match your pay cycle<\/h2>\n
Consolidate your loans<\/h2>\n
Skip those coffees and lunches<\/h2>\n
![\"smahed](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/08\/25141538\/smahed-avocado-on-toast_2000x1500.jpg?resize=800%2C600&ssl=1\")
<\/p>\nUse an offset account<\/h2>\n
![\"\"](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/05\/16124300\/How-to-Share-costs-fairly-without-falling-out-with-your-flatmates-2-1024x682.jpg?resize=1024%2C682&ssl=1\")
<\/p>\n