How to find your remaining loan term

If you’ve been repaying your mortgage for some time, you may have found you are making repayments on autopilot. But you may be closer to the end of your loan term than you think, and there are steps that homeowners can take to shave years off their loan.

Home loans typically run for a loan term between 20-30 years. Generally speaking, the shorter your loan term, the higher your monthly repayments but the lower your overall interest charges, and vice versa for a longer loan term.   

To find your remaining loan term, simply review your latest mortgage statement. This should also show you your current interest rate. You may also get this information through getting in contact with your lender’s customer service team, whether in branch, via phone or email, or through online chat.

How to shorten your remaining loan term

Owning your own home has long been the Great Australian Dream and paying it off in full is also just as important. There are several options available to homeowners to help them shorten their loan term and pay off their mortgage faster.

• Make extra repayments

If your lender allows you to make additional repayments without penalty, it may be worth adjusting your budget to allow for extra payments into your home loan. Chipping away at your principal is one way to pay off your home loan faster than making just your monthly mortgage repayments.

This can be a lump sum figure, like $10,000 in savings, or regular additional payments, like an extra $150 a month on top of your mortgage repayments. Not all lenders will allow you to do this, so best to check with your provider before you begin.

• Refinance your home loan

Another option homeowners could consider is refinancing to a new home loan. One strategy homeowners take to pay off their home loan faster is switching to a new, lower-rate lender and then continuing to make your same, higher repayments as with your original loan.

This is essentially the same as making extra repayments, however, you do not need to adjust your budget to put more of your income towards your home loan. Instead, you reduce your mortgage repayments, then continue to make a higher repayment that you know your budget can already handle.

However, if you are only a few years away from paying off your mortgage in full, this strategy may not be your best option as a lender may extend your loan term in the process of refinancing. This would defeat the entire purpose of switching. In fact, however long your loan term is, if you refinance be sure to check with your lender that you’re not extending your loan term to a new, 25–30-year term, as this will result in you paying significantly more interest over the life of the loan. 

• Make more frequent repayments

This popular strategy does not work for every home loan lender as some calculate interest repayments differently, but the theory is that as home loan interest is calculated daily, making more frequent repayments, such as weekly or fortnightly, could mean you repay your home loan faster.

 For example, if you make monthly repayments on the same date each month, this equates to 12 repayments a year. But if you’re making fortnightly repayments, this means you’re making 26 repayments a year.

This can result in you making what is effectively an additional months’ repayment versus if you paid monthly, i.e. making 13 repayments in a year as opposed to 12. This could help a borrower to shave years off their home loan over a 20-30-year loan term.

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