As a member of the Australian Defence Force, you've dedicated your career to serving Australia. Now it's time to serve your financial future by making your home loan work harder for you. Extra repayments on your home loan can be one of the most powerful tools in your financial arsenal, potentially saving you thousands in interest and helping you own your home sooner.
Understanding How Extra Repayments Impact Your Home Loan
When you make extra repayments on your home loan, you're directly reducing the principal loan amount. This means less interest is calculated on your remaining balance, creating a snowball effect that accelerates your loan repayment timeline. Even small additional amounts can make a substantial difference over the life of your loan.
For Defence Force members who often receive regular allowances or bonuses, channelling these into your home loan can be particularly effective. Whether you're on a variable interest rate or fixed interest rate home loan, extra repayments typically apply directly to the principal, reducing your overall interest burden.
Strategic Approaches for Extra Repayments
1. Regular Additional Payments
The most straightforward approach is adding a set amount to your regular repayments. Consider these options:
• Round up your repayments to the nearest $50 or $100
• Add your annual pay rise amount to your monthly repayment
• Contribute deployment allowances or bonus payments
• Use tax refunds or family tax benefits
2. Utilising an Offset Account
An offset account can be particularly valuable for Defence personnel. Your everyday banking balance reduces the interest charged on your home loan without technically making extra repayments. This strategy offers flexibility - you can access these funds if needed while still reducing your interest costs.
3. Frequency Adjustments
Changing from monthly to fortnightly repayments creates an extra month's payment each year. This approach aligns well with Defence Force pay cycles and can reduce your loan term significantly without feeling like you're making major sacrifices.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Defence Loans today.
Maximising Your Defence Force Advantages
As a Defence Force member, you have access to home loan options from banks and lenders across Australia that recognise your stable employment and unique circumstances. Many lenders offer:
• Interest rate discounts for Defence personnel
• Reduced or waived lenders mortgage insurance (LMI)
• Higher loan to value ratio (LVR) options
• Streamlined application processes
These advantages can improve your borrowing capacity and reduce your overall loan costs, making extra repayments even more effective.
Calculating the Impact of Extra Repayments
Before implementing any strategy, it's worth calculating home loan repayments to see the potential impact. Consider a $500,000 loan amount with a variable home loan rate. Adding just $200 per month in extra repayments could:
• Save tens of thousands in interest over the loan term
• Reduce your loan term by several years
• Build your home equity faster
• Provide financial security for your family
Timing Your Extra Repayment Strategy
The property market and interest rate environment can influence when to focus on extra repayments versus other investments. However, for most Defence Force members, the guaranteed return from reducing home loan interest (equivalent to your home loan interest rate) makes extra repayments an attractive option.
If you're currently renting and considering buying a home, getting pre-approved for your home loan can help you understand your borrowing capacity and plan your repayment strategy from day one.
Balancing Extra Repayments with Other Financial Goals
While extra repayments offer guaranteed returns, consider your broader financial situation:
• Maintain an emergency fund covering 3-6 months of expenses
• Consider salary sacrificing into superannuation for tax benefits
• Factor in upcoming postings or potential property purchases
• Account for stamp duty and other costs if planning to buy another property
Working with Specialists Who Understand Defence Life
The home loan application process and ongoing management can be complex, especially with the unique aspects of Defence Force careers including postings, deployments, and varying allowances. Working with mortgage brokers who understand these nuances ensures you're making informed decisions about extra repayments and your overall home loan strategy.
From the initial application process through to ongoing loan management, having expert guidance helps you access the most suitable home loan options and repayment strategies for your circumstances.
Extra repayments represent one of the most reliable ways to build wealth and achieve home ownership goals faster. By combining these strategies with the unique benefits available to Defence Force members, you can create a powerful financial foundation for your future.
Call one of our team or book an appointment at a time that works for you to discuss how extra repayment strategies can accelerate your home ownership journey.
