Can you shorten your home loan term?
Shortening your home loan term is a great way to save money on interest and become debt-free faster.
Here's what you need to know about reducing the term of your home loan:
- Refinance to a shorter loan term - One of the easiest ways to shorten your home loan term is to refinance to a new mortgage with a shorter repayment period. This can be done by negotiating a new interest rate with your lender or by switching to a new lender that offers a better deal.
- Make extra payments - Most home loans allow you to make extra payments on your mortgage, which can help you pay off the loan faster. These extra payments can be made on a regular basis, such as bi-weekly, or as a lump sum payment.
- Consider a bi-weekly repayment plan - By making bi-weekly payments instead of monthly payments, you can reduce the term of your home loan by several years. This is because bi-weekly payments are equivalent to one extra monthly payment per year, which can significantly reduce the amount of interest paid over the life of the loan.
- Round up your payments - Rounding up your mortgage payments to the nearest hundred or thousand dollars can help you pay off your loan faster. For example, if your monthly payment is $1,234, rounding up to $1,300 can help you pay off your loan sooner.
- Make a lump sum payment - If you receive a windfall, such as a bonus or inheritance, consider making a lump sum payment towards your home loan. This can significantly reduce the amount of interest paid over the life of the loan and help you become debt-free faster.
- Negotiate with your lender - If you're having trouble making extra payments or refinancing your home loan, consider negotiating with your lender. They may be able to offer you a lower interest rate or a more flexible repayment plan that will allow you to shorten the term of your home loan.
By following these tips, you can reduce the term of your home loan and become debt-free faster. Keep in mind that shortening your home loan term may also increase your monthly payments, so it's important to consider your budget and financial goals before making any changes.
Speak to a mortgage broker and see if you can you shorten your home loan term today.
Understand the mortgage lingo using our Mortgage Dictionary >