Making extra repayments on your home loan can be one of the most rewarding financial decisions you make as a Ringwood North homeowner. When you understand how to strategically apply additional payments, you can significantly reduce your loan amount and the total interest you pay over the life of your mortgage.
Understanding how extra repayments work
When you make extra repayments, you're reducing the principal balance of your loan amount. This means less money is subject to your home loan interest rate, which can save you thousands over time. Whether you have a variable interest rate or fixed interest rate home loan, extra payments typically go straight toward reducing your debt.
For homeowners in Ringwood North, even small additional payments can make a substantial difference. Adding just $50 per week to your regular repayments could potentially save you tens of thousands in interest and reduce your loan term by several years.
Offset account strategy
An offset account is one of the most effective tools for reducing your interest payments. This account is linked to your home loan, and the balance in your offset account reduces the amount on which you pay interest.
For example, if you have a $400,000 loan amount and $20,000 in your offset account, you'll only pay interest on $380,000. This strategy works particularly well with variable home loan rates, as you maintain access to your funds while reducing your interest burden.
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Book a chat with a Finance & Mortgage Broker at Craft Financial today.
Making lump sum payments
When you receive bonuses, tax refunds, or other windfalls, consider putting these toward your mortgage. Lump sum payments can dramatically reduce your principal balance and the compound effect of interest over time.
Before making large extra repayments, check with your lender about any restrictions, particularly if you have a fixed interest rate home loan. Some loans have limits on additional payments without penalties.
Increasing your regular repayment frequency
Switching from monthly to fortnightly repayments is another effective strategy. By paying fortnightly, you'll make 26 payments per year instead of 12 monthly payments – effectively making 13 months of payments annually.
This approach works well regardless of whether you're calculating home loan repayments on a variable or fixed rate basis. The additional payment each year goes directly toward reducing your principal.
Building home equity faster
Extra repayments help you build home equity more quickly. Higher home equity can benefit you when:
• You want to renovate or make improvements to your Ringwood North property
• You're considering investment property purchases
• You need to refinance or access Home Loan options from banks and lenders across Australia
• You want to avoid lenders mortgage insurance (LMI) on future purchases
Smart budgeting for extra payments
Review your financial situation regularly to identify opportunities for additional repayments. Consider:
- Salary increases – Direct raises straight to your mortgage
- Reduced expenses – Channel savings from paid-off debts or reduced costs
- Investment returns – Use dividends or capital gains
- Side income – Apply earnings from part-time work or business ventures
When to seek professional advice
The property market and lending landscape can be complex. Whether you're applying for a home loan, going through the Home Loan pre-approval process, or optimising your existing mortgage, professional guidance can help you make informed decisions.
A mortgage broker can help you access Home Loan options from multiple lenders, compare Home Loan Rates, and structure your loan to maximise the benefits of extra repayments. They can also assist with understanding your borrowing capacity and loan to value ratio (LVR) when you're buying a home or refinancing.
At Craft Financial, we understand the unique needs of Ringwood North residents. We can help you develop a personalised extra repayment strategy that aligns with your goals and financial circumstances. Our streamlined application process and relationships with various lenders mean we can find solutions that work for your situation.
Remember, every extra dollar you pay toward your mortgage today is a dollar that won't accumulate interest tomorrow. The earlier you start implementing these strategies, the more you'll save over the life of your loan.
Call one of our team or book an appointment at a time that works for you to discuss how extra repayment strategies can accelerate your path to homeownership freedom.
