Want to own your home sooner?

Making inroads into your home loan could be easier than you think.

At AMP we’re constantly looking for ways to make it easier for our customers to manage and make the most of their accounts.

Take advantage of a few basic repayment strategies and you may be able to pay off your loan sooner. Utilise built-in loan features and optional accounts on offer. Be sure you get to know and use all the features that come with your home loan. For example:

  • Can you make extra repayments to pay off your home loan more quickly?
  • Have you checked whether you're able to split your loan between a fixed and variable rate?
  • Are you repaying just the interest, or the principal plus interest?
  • explore linking your home loan to an Offset Deposit Account to save on interest
  • look at payment frequency—paying fortnightly instead of monthly, for example, can make a big difference to interest charges.

Sometimes small tweaks can have a significant impact on owning your home sooner, without having a major impact on your lifestyle. Let's take a look at these in more detail below.

Exploring repayments

When it comes to your home loan, it’s easy to feel out of control at times. But understanding all your expenses, what you’re paying and when you’re paying it is a great first step to taking control again. By budgeting, you will understand exactly where your money is going, and once you know where it’s going it is easier to cut out unnecessary expenses. 

To help take the hard work out of budgeting and managing your money AMP has developed a great new banking account, introducing the AMP Bett3r Account (Bett3r).  It’s more than just a transaction or savings account, it helps you manage your money and save for your goals whilst keeping you on track and rewarding you for taking control of your finances.

Once you are on track with your budget you can then get to know the ins and outs of your home loan, you’ll be in a much better position to start looking at ways to pay it off sooner.

Here are a few questions to help you get started.

  • What interest rate applies to your loan?
  • What is the minimum amount you need to repay every month?
  • Can you make extra repayments to pay off your home loan faster?
  • Can you change the regularity of your repayments?
  • How much are you repaying—just the interest or the principal plus interest?
  • What extra features does your home loan offer? Can you redraw the funds you’ve already paid if you need cash?

Making more frequent home loan repayments is a simple way to save on interest, pay off your loan sooner and start to build equity in your home.

Changing the frequency of your home loan repayments may not seem like much, but over time it can make a big difference to the amount of interest you pay.

If you can make your home loan repayments fortnightly, you can pay off your loan faster and reduce the interest you’re charged over the life of your loan.

A lender will generally calculate your loan with monthly repayments, but if you can pay half the monthly amount each fortnight, you'll make the equivalent of one additional monthly repayment every year.

It’s a tweak that’s often overlooked, as occasionally people estimate that there are two fortnights in a month and therefore 24 fortnights in a year—when there are in fact, 26 fortnights in a year.

How does it work?

As some months have 30 or 31 days, over the course of a year, these ‘additional days’ make up two fortnights. So, by repaying your home loan fortnightly, you make 26 payments—the equivalent of 13 monthly repayments.

If you can afford to do it, it’s a simple yet effective strategy to drive down the cost of your loan.

How much could I save?

Say you’re making monthly repayments of $1,922 on a $350,000 loan, with an interest rate of 5.20% per annum.

If you continue to make monthly repayments, it will take you 30 years and cost you a total of $691,879. That’s the principle amount you have to pay back, plus all the added interest charges.

By changing from monthly to fortnightly repayments—effectively meaning an extra payment of $1,922 a year—you’ll pay off your loan four years and 10 months earlier and save $64,174 in interest charges.

Notes
1. This example is only for illustrative purposes; interest rates would normally change over a 30-year period.

Paying extra on your home loan

If you can afford it, making extra home loan repayments is a great way to get on top of your home loan, particularly if interest rates are low.

Say your home loan is $250,000 payable over 25 years with an interest rate of 5.20% pa (with minimum monthly repayments of $1,491 to pay off the principal and interest). If you increased your regular repayments by just $100 a month, you could save $26,864 in interest and reduce the length of the loan by 2 years and 11 months.

And if you received a lump sum such as a tax return, bonus or inheritance, you could make a substantial dent in your mortgage. Let’s say you come into $20,000 after a year. If you put it towards your home loan, you could save $59,547 in interest and take 5 years and 7 months off the length of your loan.

Of course everyone’s situation is different and you need to do what’s right for you.

Offset Deposit Account

You may pay off your home loan ahead of its term and save thousands of dollars, simply by depositing all your regular income and earnings into an Offset Deposit Account, available exclusively when you take up an eligible AMP Bank home loan.  

By linking an Offset Deposit Account to an eligible loan account, you may reduce the interest calculated on your loan. You can choose between 1 and 10 Offset Deposit Accounts to be linked to any eligible loan account. The balance in your linked Offset Deposit Accounts is offset against your loan balance every day, which means you only pay interest on the remaining portion of your home loan.

Here’s what you get:

  • easy banking with My AMP, mobile banking and BankPhone
  • an AMP Visa Debit card for ATM and eftpos access
  • a cheque book to draw funds from the account
  • Bank@Post at participating Australia Post Offices.

So how does it work? A home loan offset account is a day-to-day savings account typically linked to a variable rate home loan. It allows the amount you have in savings to reduce the balance of your home loan for the purpose of calculating interest charges.

Let’s look at an example. If you have a $325,000 mortgage with an interest rate of 5.20% per annum and keep $2,500 in your offset account, you’ll only pay interest on $322,500 of the loan. The effects will add up over time—you’ll end up paying off your 30-year home loan five months early and saving $8,632 into the bargain.

The more you have in your offset account, the more you can save. For example, if you keep a balance of $25,000 in your offset account, that could help you pay off your 30-year mortgage three years and eight months earlier and save you $77,619 in interest.

Please note, calculations are illustrative, do not represent actual rates or products, and are based on an interest rate of 5.20% per annum.

For some people, an offset account is most effective when they make it the centre of their financial world. Making some simple changes to your day-to-day behaviour can maximise the benefits of an offset account and help you pay off your home loan sooner. Some of the options to consider when using an offset account are:

  • using the account for all your day-to-day banking
  • putting any extra savings into the offset account
  • using your credit card for most of your purchases and then making sure you clear the card once a month to avoid interest. Your money will sit in the offset account for longer, helping to offset mortgage interest.
Do some of your own calculations and see how an offset account could help you.

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See how you can save money and pay your loan off more quickly by increasing your repayments on loans with higher interest rates. 

Get started

When it comes to your home loan, it’s easy to feel out of control at times. But understanding all your expenses, what you’re paying and when you’re paying it is a great first step to taking control again. By budgeting, you will understand exactly where your money is going, and therefore be much more able to cut out unnecessary expenses. 

AMP has developed a great new banking account that takes all the hard work out of managing your money.  Introducing the AMP Bett3r Account (Bett3r).  It’s more than just a transaction or savings account, it helps you manage your money and save for your goals whilst keeping you on track and rewarding you for taking control of your finances.

Once you are on track with your budget you can then get to know the ins and outs of your home loan, you’ll be in a much better position to start looking at ways to pay it off sooner.

Here are a few questions to help you get started.

  • What interest rate applies to your loan?
  • What is the minimum amount you need to repay every month?
  • Can you make extra repayments to pay off your home loan faster?
  • Can you change the regularity of your repayments?
  • How much are you repaying—just the interest or the principal plus interest?
  • What extra features does your home loan offer? Can you redraw the funds you’ve already paid if you need cash?

A small change in how you repay your home loan can make a big difference. Some key shortcuts:

  • make extra repayments to get on top of your home loan
  • explore linking your home loan to an Offset Deposit Account to save on interest
  • consider splitting a loan between fixed and variable rate
  • look at payment frequency—paying fortnightly instead of monthly, for example, can make a big difference to interest charges.

An offset account is a simple tool that can help you save thousands of dollars over the life of your home loan.

Making more frequent home loan repayments is a simple way to save on interest, pay off your loan sooner and start to build equity in your home.

Changing the frequency of your home loan repayments may not seem like much, but over time it can make a big difference to the amount of interest you pay.

It’s important to consider your particular circumstances and read the relevant Terms and Conditions before deciding what’s right for you. This information hasn’t taken your personal circumstances into account.

This information is provided by AMP Bank Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

All information on this website is subject to change without notice. The credit provider and product issuer of AMP Bank products is AMP Bank Limited Australian Credit Licence 234517.