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Editor

Founder at The Passive Investor

The Editor is also the Founder of The Passive Investor website. He is a part-time practising General Practitioner (GP) with an interest in all financial and investment-related topics. He is particularly focused on the integrated use of residential property, commercial property and the sharemarket to develop effective financial strategies for wealth accumulation and distribution.

Latest posts by Editor (see all)

• DIY Commercial Property Valuation - March 2, 2014
• Controlling the Valuation Process - March 1, 2014
• Reducing Body Corporate Fees - February 28, 2014

There are countless books and articles written about how you can pay off your home loan quickly.

The key strategies to do so can basically be summarised into the following points:

1. Maximise you and your partner’s job and/or business income.

2. Buy a home with a loan amount that is not too high relative to your salary – if you over-commit in the first place this will make the task of paying off your home loan much harder.

3. Negotiate the lowest discounted variable interest rate possible with your bank (eg. ask them to match or better the lowest discounted variable rate currently on offer in the market).

4. Make sure you have a 100% home loan offset account and keep all salary, savings, rent, dividends and other lump sum payments here to minimise your loan interest bills.

5. Pay for your regular living expenses/bills via credit card and repay the credit card only when the bill is due at the end of the month, thus taking advantage of the credit card’s interest-free period instead of using cash sitting in your offset account that is reducing your loan interest.

6. Do a budget and minimise your living expenses and determine the maximum amount you can afford to save each month and make this an automatic payment into your offset account each month.

7. Make fortnightly rather than monthly principal repayments into your offset account. If you choose fortnightly repayments you’ll pay half of your monthly repayments each fortnight. Because there are 26 fortnights every year, this is equivalent to making an extra one month repayment each year.

Another point worth noting is that it may actually make more sense to pay down your home loan from the sale proceeds of residential investment properties (or commercial properties or shares for that matter) where only 50% of the capital gains are taxed (after holding them for 12 months at least).

This is in contrast to your current salary or income that may be taxed at up to the highest marginal tax rate.

The proviso to this of course being that you actually pick the right property or stock that achieves significant capital growth, particularly if you are using cash that could instead be sitting in your offset account earning a relatively high risk-free return to do so.

Or, if you are closer to your super preservation age and have still not paid off your home loan, it may make more sense to make tax-deductible contributions into super first and then pay off your home loan by using a tax-free super lump sum withdrawal once you reach your preservation age.