As a pharmacy assistant looking to get ahead with your home loan, making extra repayments can be one of the most effective ways to reduce both the loan amount and total interest paid over the life of your loan. With access to Home Loan options from banks and lenders across Australia, understanding how extra repayments work can help you make informed decisions about your financial situation.
Understanding How Extra Repayments Work
When you make additional payments beyond your required monthly repayment, every extra dollar goes directly towards reducing your loan principal. This means less money accumulates interest over time, potentially saving you thousands of dollars and reducing your loan term by several years.
For example, if you have a $400,000 home loan with a variable interest rate of 6.5% over 30 years, making an extra $200 per month could save you approximately $89,000 in interest and reduce your loan term by about 6 years.
Strategic Approaches to Extra Repayments
1. Regular Additional Payments
The most straightforward strategy involves adding a fixed amount to your regular repayments. This approach works well with both fixed interest rate home loans and variable home loan rates. Consider:
• Adding $50-200 per week to your repayments
• Rounding up your repayments to the nearest $50 or $100
• Using salary increases or bonuses for additional payments
2. Utilising an Offset Account
An offset account can be particularly effective for pharmacy assistants who want flexibility with their extra funds. This account reduces the loan amount on which interest is calculated while keeping your money accessible. The more money you maintain in your offset account, the less interest you pay.
3. Fortnightly Payment Strategy
Switching from monthly to fortnightly repayments means you'll make 26 payments per year instead of 12 monthly payments. This effectively creates one extra monthly payment annually, significantly reducing your loan term and interest costs.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Pharmacist Home Loans today.
Maximising Your Extra Repayment Benefits
Review Your Interest Rate Regularly
Regularly reviewing your home loan interest rate ensures you're not paying more than necessary. If you secured your loan when interest rate discounts were different, or if the property market has changed, refinancing might provide additional savings that can be redirected into extra repayments.
Consider Your Loan to Value Ratio (LVR)
As you make extra repayments and build home equity, your LVR decreases. This improvement might qualify you for better interest rates or help you avoid lenders mortgage insurance (LMI) on future borrowing needs.
Time Your Extra Payments Strategically
Making extra repayments early in your loan term provides maximum benefit, as more of your regular payment goes towards interest during the initial years. Even small additional amounts in the first few years can have substantial long-term impact.
Making Extra Repayments Work for Your Budget
As a pharmacy assistant, your income may vary with shifts and overtime. Consider these flexible approaches:
• Use tax refunds or bonuses for lump sum payments
• Redirect savings from reduced expenses (like paying off other debts)
• Apply salary increases directly to your home loan before adjusting your lifestyle
• Review your budget quarterly to identify opportunities for additional repayments
When to Prioritise Other Financial Goals
While extra repayments can save significant money, consider your overall financial picture:
• Ensure you have an emergency fund covering 3-6 months of expenses
• Pay off higher-interest debts first (credit cards, personal loans)
• Consider your superannuation contributions and other investment opportunities
• Factor in upcoming expenses like stamp duty for buying your next home or renovation costs
Getting Professional Guidance
Calculating home loan repayments and determining optimal extra payment strategies can be complex. Professional mortgage brokers can help you:
• Compare different Home Loan options across multiple lenders
• Understand how extra repayments affect your specific loan structure
• Explore refinancing opportunities that might enhance your repayment strategy
• Access loan health checks to ensure your current loan remains suitable
The application process for loan modifications or refinancing has become more streamlined, with many lenders offering online tools and faster processing times. However, understanding your borrowing capacity and how extra repayments might affect future lending decisions requires professional expertise.
Planning for the Future
Extra repayments not only reduce your current loan but also position you well for future property decisions. Building equity faster can help with expanding your property portfolio or accessing funds for other investments without the need for extensive documentation or new loan applications.
Consider how your extra repayment strategy aligns with your long-term goals, whether that's becoming debt-free sooner, building wealth through property, or creating financial flexibility for career changes within the pharmacy sector.
Making extra repayments on your home loan can significantly impact your financial future, but the right strategy depends on your individual circumstances, loan structure, and financial goals. Understanding how different approaches work with various interest rate environments and loan products will help you make informed decisions.
Call one of our team or book an appointment at a time that works for you to discuss how extra repayment strategies can be tailored to your situation as a pharmacy assistant.
