How to pay off a mortgage faster

Industry leaders share tips on how brokers can help their clients pay down their home loans quicker

How to pay off a mortgage faster

In the world of lending, it’s a question that gets asked a lot by consumers – how can I pay off my mortgage faster? But as brokers, helping consumers with this task requires more than just offering some simple repayment-making tips or the cheapest interest rate. MPA spoke with Brad Cramb, CEO of Distribution, Lendi Group (parent company of Aussie) and Loan Market executive chairman Sam White on how brokers can best help their clients shorten the life of their loans.

Consider the client’s objectives

According to Brad Cramb, brokers are ideally placed to help borrowers strategise a quicker loan repayment journey. The question is, does paying off a mortgage faster actually fit in with the client’s overall goals?

“A broker has got a very significant role in making sure customers’ best interests are first protected and whether paying off faster is one of those best interests – they’ve got to take it holistically and this is true now more than ever with other impacts to the economy with COVID. A broker is best placed to know that,” he said.

Looking at the borrower’s objectives is the first place to start. This includes performing a needs analysis on what the borrower is trying to achieve and understanding where they are in that journey.

“A home loan is so much more than the interest rate alone, and by understanding the client’s individual goals and circumstances that will deliver the best outcome for the borrower,” he said.

Through their knowledge of rates and product features across the market, as well as their knowledge of where the borrower is in their home ownership journey, a broker can use their wealth of knowledge to identify whether paying off a mortgage faster is the best thing for a customer to be focusing on. They can also use this knowledge to ensure the borrower is set up in the best possible way to make this happen.

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Set up the best structure

Loan structure is the most important thing for a broker to focus on when it comes to helping a borrower pay down their loan faster, said Cramb. This includes the term of the loan and the frequency of repayments, as well as whether the loan has a fixed or variable interest rate, or a combination of both.

Whether or not the borrower needs certain loan features is another important thing to discuss in line with the client’s goals and objectives, said Cramb. 

“Borrowers don’t want to be paying for loan features that they are not using,” he said.

Redraw facilities and offset accounts can come with additional costs that could instead be put into repayments.

Stay in touch

Regularly touching base with clients is a crucial way that brokers can help, said Cramb. This enables borrowers to ask for advice on shortening their loan term – and for brokers to stay up to date on their clients’ circumstances to advise them accordingly.

“It’s case by case and specific to the borrower’s needs,” he said. “It’s due to their circumstances. It might be debt consolidation, splitting the home loan into fixed and variable components, refinancing to a more competitive package or looking at term.”

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Help them save money

According to Sam White, there is an opportunity for brokers to help clients with cashflow management. Saving money on different services could enable the borrower to put more into their home loan and pay it off quicker, he said.

“One of the opportunities with open banking will be, can we help them to save money through getting better deals on some of their bills, not just on savings in interest,” he said. “I think more and more good brokerages are going to start to look at how they help customers save money as much as save interest.”

While this could be seen as an extension of service, he said it would be interesting to see how much technology can enable this to occur over time.

Brokers are already in a good position to help clients given they know how much their monthly expenditure and income is. The question is, could brokers also help these customers source better deals to save them money like they already do with home loans?

“I think that’s potentially something that will happen more and more in the future – and that will help them pay down their mortgage faster,” he said. “The other thing is this whole education piece. If you move towards paying fortnightly rather than monthly, for example. I think there will be some interesting areas to explore.”