Tip: Increase the regularity of your repayments

You can save by making fortnightly or weekly repayments instead of monthly. If you choose weekly repayments you’ll pay a quarter of your monthly repayments each week.

Because there are 52 weeks every year, this is equivalent to making an extra month’s payment each year. This means you’ll build equity in your home more quickly, plus pay off your loan sooner and save in interest.

Example 1: Mary’s home loan

Mary’s required monthly repayment amount is $1,932 on a $300,000 loan with a loan term of 25 years. Paying monthly, Mary will pay a total of $23,194 in one year.

She decides to pay weekly instead, so her repayments become $483 a week ($1,932 / 4). After 52 weeks in that year Mary has paid a total of $25,127, which is equivalent to an extra month’s repayment. With these additional repayments each year, she’ll be able to pay off her loan approximately four years sooner and save $55,000 in interest.

CaseStudies_HomeLoanRepayments_03

Make larger repayments

You also have the choice of paying more than your required monthly repayment amount to build your equity. This way you could also reduce your loan term and save on interest. To do this you can make additional lump sum repayments when you have extra cash. Or, schedule your Direct Debit or Automatic Funds Transfer to be higher than your required repayment amount.

Example 2: James’s home loan

James’s required weekly repayment amount is $443 on a $300,000 loan with a loan term of 25 years. Over the term of the loan he’ll pay a total of $23,067 in one year and over 25 years he’ll pay $577,396.

James decides that he has an additional $50 each week that he can use to pay down his loan. If he maintains this over the years he’ll end up paying off his loan five years early, saving over $63,700 in interest.

CaseStudies_HomeLoanRepayments_08

Make lump sum repayments

If you can make lump sum repayments, you could quickly build up the equity in your home. These additional repayments can also have a positive effect on how much your total repayment amount will be – especially if they’re made in the early years of your loan.

Example 3: Susan’s home loan

Susan’s Required Weekly Repayment Amount is $443 on a $300,000 loan with a loan term of 25 years. Over the term of the loan she’ll pay a total of $23,067 in one year, and over 25 years, Susan will pay $577,396.

After five years, Susan receives an inheritance of $50,000. She puts this into her home loan making the lump sum repayment of $50,000 means that instead of paying off her loan after 25 years, she’s reduced the loan term to 19 years – if her repayments remain the same over the years, Susan will also save over $87,000 in interest.

CaseStudies_HomeLoanRepayments_12