At Stryve Finance, we believe that “smart” means more than just making extra repayments. It means structuring your mortgage around your unique financial goals, helping you own your home faster, without compromising your lifestyle.
What Are Smart Mortgage Strategies?
Most of your advice regarding mortgages is the same: make extra repayments, get a better rate, and hope for the best. But smart mortgage strategies are about much more than that. A smart approach means taking control of your mortgage intelligently, strategically, and flexibly. It’s about understanding how every component of your loan, from interest rates to repayment structures, can work in your favour. By using well-planned strategies, you can:
- Reduce the amount of interest you pay over the life of your loan.
- Pay off your mortgage faster without sacrificing your quality of life.
- Prepare for rate rises and unexpected life changes, making your loan adaptable to your future goals.
In this article, we will explore the most effective strategies for mastering your mortgage and paying it off faster. Whether you’re a first-time homebuyer, a property investor, or looking to restructure your mortgage, these smart strategies can save you tens of thousands in interest and shave years off your loan when implemented strategically.
1. Use an Offset Account Effectively
One of the most innovative ways to reduce the interest you pay over the life of your mortgage is by using an offset account. While most people are familiar with the concept of an offset account, many don’t fully understand how powerful it can be.
What Is an Offset Account?
An offset account is a type of transaction account that’s linked directly to your mortgage. The balance of your offset account is used to reduce the amount of your loan that accrues interest. For example, if you have a $500,000 loan and $50,000 in your offset account, you will only pay interest on $450,000 of your loan balance.
Why It’s a Smart Strategy
- Interest Reduction: Because your savings “offset” your loan balance, you pay less interest, which can save you over $20,000 in interest on a $500,000 loan over 25 years, depending on your offset balance.
- Flexible Savings: You can still access the funds in your offset account whenever needed, so you’re not locking away money in a savings account.
- Quick Impact: The more you keep in your offset account, the faster your loan balance reduces, helping you pay off your mortgage up to 3–5 years earlier by reducing the interest charged on the loan.
Stryve Tip:
Make it a habit to deposit all your income and any additional savings into your offset account. This way, you’re effectively lowering your loan balance and reducing the interest you pay while keeping your money liquid and available.
2. Split Your Loan for Flexibility
Interest rates can fluctuate, and life is unpredictable. This is why splitting your loan between a fixed and variable rate can be one of the smartest mortgage strategies. Offers the benefit of stable repayments on part of your loan while still allowing extra repayments and redraws on the variable portion, giving you protection and flexibility.
Why You Should Split Your Loan
- Fixed Rate Portion: Protects you from interest rate hikes, ensuring your repayments stay the same for a set period. This is ideal for those who value stability.
- Variable Rate Portion: Allows you to make extra repayments, access redraw or offset features, and take advantage of potential rate cuts. It’s perfect for those more financially flexible and want to reduce their mortgage balance quicker.
Who Should Use a Split Loan?
If you value certainty but also want the flexibility to pay off your mortgage faster, then a split loan may be an excellent option. Additionally, if you anticipate interest rates rising, the fixed portion will help buffer against those changes.
3. Pay Fortnightly, Not Monthly
Here’s a simple, yet incredibly effective strategy to help you pay off your mortgage faster without increasing your overall repayments: switch to fortnightly payments.
How Does It Work?
Instead of making monthly repayments, you pay half of your monthly repayment amount every fortnight (every two weeks). Over the years, this adds up to 13 full payments rather than 12, giving you one extra repayment each year. That 13th annual payment can reduce your loan term by 3–5 years and save tens of thousands in interest over a 30-year loan.
Why It’s Smart:
- Extra Repayment Every Year: Without even realising it, you’ll make an additional payment every year, reducing your loan principal.
- Faster Loan Repayment: Even a small extra repayment can reduce your mortgage term by up to 4 years and save you more than $15,000 in interest on a $400,000 loan over 25 years.
- No Impact on Lifestyle: Your budget stays largely unaffected since you’re only paying half of your usual monthly repayment every fortnight.
4. Refinance with Purpose, Not Just for Rate
Refinancing is often seen as a way to chase lower interest rates, but smart refinancing is about more than just securing a better deal. It’s about restructuring your mortgage to consolidate debt, fund renovations, or unlock equity for investing, depending on your financial goals.
What Does Refinancing Do for You?
Refinancing isn’t just about finding a cheaper rate; it’s about structuring your loan to meet your needs. For example:
- Lower interest rates: If market rates have dropped, refinancing can secure a lower rate and reduce repayments.
- Loan features: You can choose loans with features like offset accounts, redraw facilities, or the ability to split your loan for flexibility.
- Consolidate debt: If you have high-interest debt like credit cards, refinancing your mortgage to include that debt at a lower interest rate can save you a lot of money.
- Tap into equity: Refinancing allows you to borrow against your home’s increased value to fund renovations, investment properties, or other expenses.
Why It’s a Smart Strategy:
- Tailor Your Loan: Refinancing allows you to adjust your loan to match your life stage. Whether investing in property, upgrading your home, or simply consolidating debts, refinancing lets you do that on your terms.
- Save Money: You can lower your interest rate and access better loan features that help you save and pay off your mortgage faster.
- Avoid Hidden Costs: Refinancing can come with fees, so ensure you understand the full cost and whether it’s worth the benefits.
5. Leverage Extra Repayments, But Stay Flexible
Making extra repayments is one of the most potent ways to pay off your mortgage faster. Making additional payments seems obvious, but how you approach them can make the most significant difference.
How Extra Repayments Work
When you make an additional payment, it’s applied directly to the principal (the loan amount), which reduces the total interest charged on your loan. The more frequently you repay extra, the faster your loan balance shrinks.
For example, making an extra $100 monthly is $1,200 per year, significantly reducing your mortgage principal and the interest you’ll pay over time.
Why It’s Smart:
- Accelerate Loan Repayment: Extra repayments reduce your loan balance, meaning you’ll pay off your mortgage quicker.
- Save on Interest: Every extra dollar you pay goes straight toward reducing your loan principal, which cuts the amount of interest you pay.
- Flexibility: If your loan has a redraw facility or offset account, you can still access these extra repayments if needed. You’re not locking up money you might need in an emergency.
Stryve Tip:
If your loan is structured with a redraw facility, remember that you may be tempted to withdraw the extra repayments you’ve made. It’s important to stay disciplined and avoid the temptation to use those funds unless absolutely necessary. The more you contribute, the faster your mortgage will disappear.
6. Avoid Interest-Only Loans (Unless You’re Investing)
While interest-only loans can appear attractive due to their lower monthly repayments, they may not be the best choice for homeowners looking to pay off their mortgage faster. In an interest-only loan, you’re only paying the interest on your loan, not reducing the principal.
When Interest-Only Loans Make Sense
Interest-only loans can be helpful for property investors who want to maximise their tax deductions and don’t mind the slower build-up of equity. For investors, this structure allows for higher cash flow by lowering monthly repayments, freeing up money for other investments or expenses.
When Interest-Only Loans Don’t Make Sense
For homeowners, taking out an interest-only loan means your mortgage balance won’t reduce, and you’re essentially paying the same amount every month, without building equity. Sticking to a principal and interest loan is a better option if you want to pay off your home sooner.
Why It’s Smart:
- Long-Term Growth: By paying off the principal instead of just the interest, you build equity faster, which is essential for financial freedom.
- Avoid Paying More Over Time: Interest-only loans may seem cheaper in the short term, but they can cost you more in interest over the life of the loan.
7. Future-Proof with Rate Buffering
Mortgage rates can rise unexpectedly, and a rate hike can cause significant financial strain if you haven’t planned for it. One of the smartest ways to protect yourself from rate increases is to buffer your repayments by paying as if your rate is already higher than it currently is.
How Rate Buffering Works
Even if your interest rate is low today, you can prepare for future increases by calculating what your repayments would be at a higher rate, typically 2% higher than your current rate. Then, adjust your monthly payments as if the rate increase has occurred.
For example, your repayments would increase if you’re paying a 4% rate and your lender hikes the rate to 6%. By paying as if your rate is 6% today, you’ll already be used to the higher repayments and can avoid financial stress when rates eventually rise.
Why It’s Smart:
- Avoid Future Financial Strain: Paying more today, even if unnecessary, gives you a cushion for when rates inevitably rise.
- Save Thousands in Interest: By preemptively increasing your repayments, you’ll pay off your loan faster, which reduces the interest you’ll pay over the life of the loan.
- Stay Prepared for Rate Rises: Even minor adjustments to your repayment strategy can significantly affect how quickly you repay your loan.
8. Use a Mortgage Broker Strategically
A mortgage broker does more than just compare rates. A competent mortgage broker like Stryve Finance will assess your financial picture and help structure a loan tailored to your current situation and future goals.
Why Partner with a Mortgage Broker?
- Tailored Advice: Brokers can structure your mortgage in ways that align with your lifestyle goals, whether it’s paying off your mortgage faster, investing in property, or consolidating debt.
- Navigate the Maze of Lenders: With access to multiple lenders and loan products, a mortgage broker can find the best deal that suits your needs, not just the lowest rate.
- Save Time and Effort: Mortgage brokers handle all the paperwork and lender communications, saving you time and hassle, and ensuring you get the best possible deal.
Case Study:
Take the example of a Sydney couple who came to Stryve Finance. With a free mortgage review, we helped them save $17,000 in interest over 3 years and cut 4 years off their mortgage. By optimising their loan structure and finding a better rate, they’re now on track to pay off their mortgage 4 years earlier than they planned without increasing their repayments.
Bonus Smart Tips for Optimising Your Mortgage
In addition to the core strategies mentioned, here are a few bonus tips that can significantly affect how quickly you pay off your mortgage and how much interest you save.
1. Consolidate High-Interest Debt into Your Mortgage
If you have credit card debt or personal loans with high-interest rates, consolidating them into your mortgage can be a smart strategy. This approach will help you save on interest by taking advantage of your mortgage’s lower interest rate.
However, it’s essential to be disciplined. If you’re consolidating your debt into your mortgage, ensure you focus on paying off the debt quickly, or you may have a higher loan balance in the long term.
Why it’s smart:
- Lower interest rates: Mortgage rates are typically much lower than credit cards or personal loans, so consolidating debt can lower the overall interest you pay.
- Easier management: Having all your debts in one place makes managing them easier, reducing the number of payments and due dates.
2. Choose Lenders with Real-Time Offset Syncing
Some lenders offer real-time offset syncing, where any money deposited into your offset account is instantly used to reduce your loan balance, even during the day. This means that every dollar you deposit counts right away, providing you with faster interest savings.
Not all lenders provide this feature, so it’s worth checking if your current lender offers it or if switching to one that does could benefit you.
Why it’s smart:
- Maximises savings: You’ll pay less interest over time by reducing the principal faster.
- More efficient: Your savings are put to work immediately, rather than waiting for the next business day.
3. Avoid Redraw Traps
Many loans come with a redraw facility, which allows you to access any extra repayments you’ve made. While this feature can be helpful in emergencies, it’s easy to get caught up in the convenience of using the funds and resetting your loan balance.
If you’re serious about paying off your mortgage faster, it’s important to avoid using redraw for non-emergencies. Every time you redraw funds, it essentially resets your loan balance, which can set back your repayment goals.
Why it’s smart:
- Avoid setbacks: Redrawing funds can increase your loan balance and extend your repayment timeline, meaning you pay more interest in the long run.
- Keeps you disciplined: By resisting the urge to access the extra repayments, you’ll maintain momentum toward early repayment, potentially cutting years off your loan and saving thousands.
Smart Mortgage Strategies by Life Stage
Your mortgage strategy will vary depending on your life stage and financial goals. Whether you’re a first-time homebuyer, an investor, or looking to downsize later, tailoring your mortgage to factors like your income, life stage, and long-term goals, such as investing or downsizing is key to reducing interest and achieving financial security.
First-Home Buyers
As a first-home buyer, you aim to enter the market without overstretching yourself. Here are a few smart strategies to help you make the most of your mortgage:
- Take advantage of the First Home Owner Grant (FHOG) and First Home Super Saver Scheme (FHSSS) for deposit assistance.
- Start with a variable-rate loan to take advantage of potential rate drops and consider an offset account from the start to help reduce interest.
- Focus on building equity early, and use extra repayments to reduce your loan balance.
Stryve Tip:
If you’re eligible, check out the Stamp Duty Exemptions and grants in your state or territory; these can help reduce your upfront costs.
Upgraders
The mortgage strategy shifts for homeowners looking to upgrade to a bigger property. Now, you’re likely balancing an existing home loan with wanting to purchase a new one.
- Consider bridging finance if you need to buy a new home before selling your current property.
- Use your home equity to fund the upgrade; you can borrow against the value of your current home to finance the new one.
- Plan your sale timing carefully to avoid extra stress, especially if you must manage two mortgages simultaneously.
Stryve Tip:
Speak with a mortgage broker to evaluate your options for equity release and to structure a loan that doesn’t stretch your finances too thin during the transition.
Property Investors
As a property investor, your mortgage strategy will be more focused on leveraging debt to grow your portfolio.
- Interest-only loans can be beneficial for tax purposes, but ensure you have a clear exit strategy.
- Consider separating loans for each property to keep your finances organised and optimise your tax position.
- Use an offset account or extra repayments to reduce interest and maximise cash flow.
Stryve Tip:
Talk to your accountant and mortgage broker to ensure your investment loan structure aligns with your tax strategy and long-term investment goals.
Near-Retirees
For those nearing retirement, the focus often shifts from growing assets to preserving wealth and reducing debt.
- Downsize: Selling your home for a smaller property can free up cash to pay your mortgage or support your retirement fund.
- Consider a reverse mortgage if you want to stay in your home while accessing its equity to fund your retirement.
- Aim to pay off your mortgage before retirement to ensure a stress-free retirement with no housing debt.
Stryve Tip:
Explore pensioner home loan options or reverse mortgage plans if you want to stay in your home without the burden of a traditional mortgage.
Conclusion: Think Beyond the Basics
Innovative mortgage strategies aren’t one-size-fits-all. They’re about tailoring your loan to fit your personal goals and financial situation. Whether you’re looking to reduce interest, pay off your mortgage faster, or protect yourself against future rate rises, a customised mortgage strategy can help you build equity faster, lower your lifetime interest payments, and achieve financial goals like early retirement or investment expansion sooner.
At Stryve Finance, we specialise in helping Australians make smarter financial decisions. If you’re ready to take control of your mortgage and start working towards your financial freedom, we’re here to help.
👉 Book your free Smart Mortgage Strategy Session today
Your mortgage isn’t just a loan. It’s a strategy waiting to be optimised.
Dylan Bertovic is the Director and Senior Finance Broker at Stryve Finance, specialising in non-traditional lending solutions. He helps clients across Australia with tiny home loans, construction finance, equipment and asset lending, refinancing, and investor loans. With deep expertise in self-employed and renovation mortgages, Dylan is known for crafting tailored strategies that get results
