Hacks to pay off your mortgage fast

No-one likes the sort of debt that hangs around for decades, but unfortunately for many Australian homeowners, it’s become the norm.

Property prices have risen at a rapid pace, as have our liabilities.

In fact, Australia is now on par with Switzerland when it comes to household debt, according to a recent report.

However, some savvy homeowners are managing to defy the trend and rid themselves of their mortgage and credit card debt quickly. Here are some of the popular strategies they use.

Get a mortgage offset account

As the name suggests, an offset account allows you to offset interest by putting your savings into an attached transaction account.

For diligent borrowers, these handy accounts can significantly reduce how much they pay over the life of their loan. The added bonus is you’re saving at the same time. What’s in it for the lender?

They don’t have to pay you interest on the savings you accrue. There are hundreds of lenders with offset accounts on the market.

Set up additional repayments

From time to time, you may have a quiet month – especially in winter - and find you have a little extra in the bank to put towards your loan.

However, some home loans – particularly fixed rate loans – do not allow extra repayments.

If you think you may be in a position to make more repayments than you budgeted for, it could be worth looking at a split loan option, where a proportion of your home loan is tied to a fixed rate and a proportion is variable.

It’s also worth asking your lender if they charge for additional repayments, as this can negate the benefit.

Put bonuses, tax refunds and dividends straight into the home loan

It’s bonus and tax season and dividend season is just around the corner.

If you’re an employee or a sharemarket investor, you could be in for a windfall.

This is a great opportunity to take a large chunk out of your home loan, especially as interest rates are at record lows, which means more of your money goes towards reducing the principal.

Look for a better rate

There’s a lot of competition in the mortgage market and many lenders are taking the RBA’s cue and lowering their own rates.

If you are paying more than 4 per cent on your mortgage, it’s probably time to take a look at what other lenders have on offer.

Some of the more competitive lenders on the market can shave 0.25 per cent off that figure.

Sometimes, lenders will also do a deal with you, especially if you are willing to take on other products with them (or already have other products).

Just be aware that some home loans have hefty exit fees, so it’s always worth checking if it makes financial sense for you.

Kate Cowling is personal finance editor at RateCity.com.au. This article is general advice only and should not be substituted for tailored financial advice.