Advice matters
Rising mortgage rates? How to pay your home loan faster

As you may have heard, mortgage rates are on the rise again, on the back of official cash rate (OCR) movements. And economists expect further increases in the new year.

In mid-November, media reported that home loan rates had risen at their fastest pace in 15 years, in some cases quickly returning to pre-Covid levels. Borrowers who fixed in 2019, and are looking at refixing now, may not see a significant change. But those who fixed for one year in late 2020 are likely to be affected.

Having said, if your budget allows it, paying off your mortgage as fast as possible is still important. The faster you pay your mortgage down, the lower the total interest you will pay, and the more equity you’ll have in your home. So here are some steps you can take, according to our SHARE advisers.

Consider paying more than the minimum

Over the past few years, with mortgage rates dropping, many borrowers managed to refix at a lower rate while keeping their payment the same. This way, they paid more than the minimum without seeing much difference in their budget. And the extra amount went to reduce the principal portion of the mortgage, cutting years off the loan term and saving them tens of thousands of dollars in overall interest costs.

Depending on your circumstances, rate increases may now have made this strategy a little more challenging. But if you can afford it, it’s still worth considering. Even upping your payment amount by a mere $20 or $50 can make quite a difference in the long-term.

On this note, keep in mind that if you’re on a fixed rate, you can make extra repayments each year up to a certain limit without incurring any fees. On the other hand, there are no limits if you’re on a floating rate. Essentially, you have two options: making sure that your extra payments don’t exceed the limit, or waiting until your rate expires to make a lump-sum payment. Then, you can choose whether to refix or not.

Get in touch with to learn more about your options: our SHARE advisers are here to help.

Set a budget

As we said, upping your payments can be challenging now that rates are rising. But there may still be ways to find some extra dollars to put towards your mortgage. So if you haven’t done that already, recording your income and expenses can help you keep track of where your money is going, and identify opportunities to save.

Some expenses are fixed or fairly constant, like monthly subscriptions: are there any that you’re not actually using?

Other expenses are regular and often necessary, like utility bills: but the fact that they fall in the ‘needs’ category doesn’t mean they can’t be changed. In fact, saving on them can add up quite a bit over time.

And then, there are irregular and discretionary expenses, which are more difficult to track as they change day to day, or from month to month. This is also an area where people have the most flexibility in their budget, so if you’d like to make room for extra mortgage repayments, it’s a good place to start.

Review your mortgage regularly

As we’ve seen, things can change quickly in your life and in the lending environment. So even if you’re not well-placed to ramp up your mortgage payments right now, you might be able to in the near future.

In other words, it’s crucial to keep your mortgage top-of-mind. Home loans are long-term commitments, and by making small tweaks along the way, you can ensure that your loan is both affordable in the short term and sustainable in the long run. At the end of the day, it’s all about ensuring you’re not paying more than necessary while making the most of your home ownership journey.

Once again, our SHARE mortgage advisers can help you review your circumstances and assess the next steps. Please don’t hesitate to contact us.

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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.