Buying a house is by far most people's most expensive purchase. It also usually comes with a lot of debt. So, I can definitely understand why people would want to pay off their mortgage faster.
It's worth considering if whether you paying off the mortgage quickly is the best thing to do because of how low interest rates have gone in the last couple of years.
But paying off your Commonwealth Bank of Australia (ASX: CBA) or Westpac Banking Corp (ASX: WBC) mortgage quicker means the banker isn't hovering over you and your property isn't at risk.
So, if you do want to pay things off quicker, you could do one (or more) of these things:
Change the payment frequency
One of the most common finance tips to manage your mortgage is to increase the frequency of your mortgage payments, assuming the bank calculates the interest on a daily basis.
Indeed, if you don't account for every dollar in an annual budget, then you could 'trick' your money by changing the payment to fortnightly and paying half of the previous monthly payment. There are more fortnights (26) than half-months (24), so you end up paying more over a year without really noticing much of a difference.
Make additional payments
If your loan allows you to make additional payments to your mortgage then you could just put lump sums into paying it off. Just make sure you're not being penalised by the bank for doing this.
Putting, say, a one-off $10,000 into your mortgage would reduce the interest charged by thousands of dollars over the life of a loan.
But, as I said at the start, it's worth considering whether that lump sum is better off saving you interest at (pre-tax) 3% or 4% a year compared to the potential returns of shares.
Load up the offset account
If you have an offset account then it's definitely a good idea to utilise it because it reduces how much interest you're charged.
For example, if you have a $500,000 loan and a $20,000 in your offset account then you are only charged interest on $480,000. The interest saving is at a higher interest rate than a savings account and is tax free.
Your monthly repayment to the bank will still be the same but the principal will be repaid quicker.
Foolish takeaway
Although I don't have a mortgage yet, I'll definitely be utilising the offset account as much as possible. Making a tax-free return whilst simultaneously paying off your mortgage sounds great to me.
