Reviewing your mortgage regularly can help you find ways to pay it off faster. Get started with these useful tips.
When you think about your mortgage as a 30-year commitment, it’s easy to just set it and forget it. To make sure you’re paying your home loan off as quickly and affordably as possible, it’s important to review your home loan regularly.
1. Think about your home loan in relation to your life goals
Take a moment to think about where you see yourself in the next year or two. You might consider:
- whether you can pay off your home loan faster
- making improvements or renovating your home
- purchasing a holiday home
- starting a family and possibly changing from two incomes to one
- downsizing to a smaller home
- whether you’re ready to buy an investment property.
These factors can all affect the way you think about your mortgage. For example, if your goal is to pay off your home loan faster, you could consider placing a portion on a floating rate. Floating rates are generally higher than fixed rates, but they let you make additional payments at any time without possible extra costs.
2. Check how long is left on your fixed rate period
One of the best times to review your home loan is near the end of your fixed rate period. Not only is this a timely reminder to check in on your financial situation, but you’ll also have more flexibility compared to trying to make changes in the middle of a fixed rate period.
Keep tabs on when your fixed rate is due to roll over so you can give yourself plenty of time to explore the best way to structure your loan.
3. Review your repayments
Consider whether you can afford to increase your home loan repayments, keeping in mind that in some instances early repayment fees may apply.
Possible options might be:
- rounding up (for example, pay $1,370 instead of $1,362 per month)
- paying every two weeks instead of every calendar month, effectively making two extra fortnightly repayments per year (whether this is doable depends on your bank, so you’ll need to check with your mortgage provider)
- making a lump sum payment (just be sure to check your mortgage’s rules and fees around these types of payments first).
- Even small changes can make a big difference over the life of your home loan. For example, an extra $10 a fortnight could shave almost a year and $11,000 in interest off a $300,000 home loan with a floating interest rate of 5.30% p.a.
4. Give your mortgage structure a check-up
Review whether your mortgage structure is still working well. You could:
- put a portion on a floating rate, so you can make more lump sum payments
- split your mortgage over different fixed rate periods and interest rates – for example, into a 1 year fixed rate period, a 2 year fixed rate period, and a variable rate – to reduce your overall risk settings
5. Book in for a financial health check
Financial health checks are a great opportunity to talk to an expert and review whether your situation has changed. It’s a great chance to review your current position and plan for the future. BNZ’s financial health checks are free and available to everyone, not just BNZ customers. If you’re interested, you can make a request online.
Just like our lives, a mortgage doesn’t work in a straight line. Nothing is ever set entirely in stone – so set yourself a yearly reminder to check in on your home loan.