Do you want the option to repay the whole loan earlier than expected? If so, then a variable-rate loan may be the better choice, as they tend to be more flexible than fixed-rate loans. Loans with fixed rates tend to have stiffer payment options and penalties.
It’s generally a good idea to pay every two weeks instead of every month, as it shortens both the payment period AND the overall cost of interest. As an example: Let’s say you took out a $300,000 home loan with a 5.5% fixed interest for 30 years. Paying every two weeks will let you settle the loan more than five years earlier AND save more than $62,000 in interest.
Got a tax refund? Just got your share of the family inheritance? Won a little money over the weekend? We recommend you put this extra money into your mortgage offset account, as it can make you the proud owner of your own home several years sooner. That vacation can wait.
You may feel tempted to lower your payments accordingly when interest rates drop. Don’t. Keep paying the same amount (or more, if you can afford it), as low interest rates simply gives you a chance to save a few years and thousands of dollars in the long run. Don’t rob yourself of the opportunity!
Try this: Collect all the loose change you find into a small container for a few weeks, then put it towards your payments. Also, save a little money every single month by making your own coffee instead of buying from Starbucks. Even an extra $50 every month will save you thousands, or even tens of thousands, over the next few years.