Five days to sort your finances - Step 4: Sort your mortgage

If 2025 is the year you get your money life sorted, you may be wondering where to begin.

In this five-part series, Money Correspondent Susan Edmunds guides you through the basics.

Next up: Sorting your mortgage

If you've got a mortgage, one of your priorities might be to try to get rid of it as soon as possible.

There are a few changes you can make that could get you closer to that goal.

Increase your repayments

First up, the most obvious one.

If you make bigger repayments, you'll be able to clear your home loan faster. What surprises some people is how much of a difference even a small increase in your home loan repayments can make, particularly if you haven't had your home loan for a long time.

If you borrow $500,000, for example, over a 30-year term with an interest rate of 5.99 percent, you'll pay just under $3000 a month. But if you can increase your repayment to $3500, you'll clear your loan about nine years earlier.

You can increase your repayments by opting for a higher level when your loan comes up to refix. You might also be able to make extra payments during the fixed period - banks will usually charge a fee if you pay off more than a certain amount while you're on a fixed rate.

When your loan rolls off its fixed term, you could also make an additional one-off payment before you refix again.

Anything you can do to pay the balance off faster will save you a lot in the long run because it means the principal will be smaller and there won't be so much to attract interest - which compounds - over the life of the loan.

Split your loan

You can split your loan into a number of smaller loans. This allows you to take advantage of different interest rates.

At the moment, longer fixes are cheaper than short ones, so you might choose to fix part for a longer cheaper rate and have some on a shorter term to give you flexibility to jump on cheaper rates if you see them in future.

It also means you can choose to make higher repayments on one of the loans, and maybe aim to clear that before switching your attention to the other.

Ask for low-equity margin to be removed, or for special rate access

If you bought your house a while ago with a small deposit, you might be paying a low-equity margin on your interest rate.

You might also be paying higher rates than the "specials" banks advertise for borrowers with more deposit.

You could ask your bank to reassess your situation - if your property has improved in value or you've paid off your loan a bit, you could have improved your equity position, or you might find the bank is willing to negotiate.

Shop around for a sharper rate

If you don't think you're getting a good deal from your lender, you could look at what else is available in the market. A mortgage broker could help with this.

Sometimes you can get cash back to help with the costs of shifting. It's usually not worth moving to a new lender for a difference of a few percentage points, though, because the banks that are marginally more expensive now might be the cheaper ones in a year or two.

But if you can get a clearly better deal elsewhere, or a loan that better matches your needs, it could be a good plan.

Consider off-set

If you have savings that you want to keep separate from your mortgage, you could set up an offset facility.

That means you forgo the interest on your savings but also reduce your mortgage interest bill. It's sometimes possible to do this by linking with family members' accounts, too.

Consider revolving credit

If you have the discipline, a revolving credit facility can work well. This means you section off part of your home loan into what is basically a large overdraft and usually becomes your main transaction account.

You then aim to put your spending on your credit card each month and have your income going into your new revolving credit account.

This means you reduce the interest you pay on that portion of the loan for the period that income is sitting there. Hopefully when you pay your credit cards at the end of the month, there's a bit left over to reduce what you owe.

You need to be a bit careful with this, tough, because over time the idea is that you'll build up money in that account as you pay it down and you don't want to be tempted to spend it again.

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