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Want To Expedite Your Home Loan Repayments? Your Expert Guide To Budgeting To Achieve Homeownership

In this article we provide an overview of budgeting strategies to help accelerate your journey to homeownership. Included are for reducing debt, utilising offset accounts and budgeting insights to get you back on the right path.

8 minute read

Accounting Tasks

Benefits Of Budgeting For Paying Off Your Home Loan

Strategic budgeting is essential for homeowners looking to accelerate the homeownership process. By carefully managing their finances and budget, families can allocate more funds towards their home loan, reducing the principal amount of the loan and therefore, pay their home loan off faster. This proactive approach to budgeting not only helps in achieving financial goals sooner but also reduces the overall interest paid on the home loan, potentially saving tens of thousands of dollars in the long run.

Furthermore, having a well-structured budget allows homeowners to have a clearer picture of their financial situation, enabling them to identify areas where savings can be maximised and expenses can be minimised. By evaluating their regular expenses, families may find opportunities to cut down on non-essential spending such as dining out, entertainment, or subscription services, and direct those funds towards their offset account linked to their home loan - saving you interest.

By understanding and embracing the importance of strategic budgeting, homeowners can take proactive steps to not only reduce their biggest financial burden but also achieve the financial freedom and security that comes with owning their home outright. This approach sets the stage for a more stable and secure financial future, empowering families to make informed decisions about their money and work towards their long-term financial goals.

Importance of Budgeting For Paying Off Your Home Loan

Budgeting plays a pivotal role in everyday life however, where do you start? It starts with having the correct loan structure and choosing the right product that allows certain loan features such as offset accounts, loan splitting and additional repayments. Once the correct loan structure is in place you can know see the flow of your money in a clearer picture.

Practical budgeting strategies enable homeowners to allocate more funds towards their home loan. Making more frequent repayments and having additional funds available to you in an offset account are effective strategies that can help homeowners stay on track with their homeownership goals.

By implementing these strategies, homeowners can take significant steps towards achieving their financial objectives and securing a debt-free future.

How To Create An Effective Budget?

With our clients we often find that the hardest task about budgeting is starting in the first place. Your future self will thank you for taking the time to have a quiet moment and start a family budget. Every family is unique however our core philosophy at Appreciate FS is to split your gross income into four groups.

- 40% Expenses

- 30% Home loan repayments

- 20% Tax

- 10% Debt repayment, savings or investment

Your income is your wages from employment only. You can include rental income, dividends or other forms of passive income however, if you choose to leave that income out you will only make your journey to homeownership quicker.


Lets talk about the hardest topic first - Expenses! When budgeting, expenses should make up no more than 40% of your gross income, especially if we are leaving out your biggest expense from this category - your home loan. It is important to split your expenses into two categories - 'needs' and 'wants'. We encourage clients to split their expenses 30%/10% of their gross income. 30% 'needs' and 10% 'wants'.

'Needs' are certain items that are required in everyday life such as groceries, electricity and water - unfortunately Netflix is not included!

'Wants' are items that are not needed in everyday life but make you happy when you purchase them ie. retail therapy!

Home Loan Repayments

As mortgage brokers, we understand how the interest rate rises have impacted household budgets however, it is important to understand that in some cases the financial stress that comes with the rates rises and paying off a home loan can be too much and steps need to be taken to rectify it. We believe that your home loan repayments should be no more than 30% of your gross income. This is an acceptable amount to be contributing towards your home loan. If you are putting more than 30% of your gross income towards your home loan then other categories will suffer, reducing your quality of life.

If you, or someone you know, are paying more than 30% of their gross income towards their home loan they may be in financial stress. Get in touch with us today for guidance on how to better manage your home loan repayments so you can live the life you dreamed of when you purchased your home!

Tax Liabilities

By also being accountants, we get that tax is apart of earning an income however, if you are paying more than 20% of your gross income in tax there are strategies that you can use to put more tax money back in your pocket!


If you want to reduce the amount of tax you pay please get in touch with us today!

Debt Repayment, Savings or Investment

When we start on the budgeting journey we tend to advise clients to pay off their bad debt first. This is debt that is not tax deductible ie. personal loans and payday loans. By allocating 10% of your gross income to bad debts you are able to pay them off sooner and saving interest in the process. Once the bad debts are under control, we then allocate money to savings or a rainy day fund. We believe that you should have access to at least 2 months in wages whether that be in the form of cash in the offset account or equity in your home. If you don't have access to 2 months wages we strongly recommend putting aside 10% of each pay until you have the funds available to you. Having a separate savings account is recommended however, we strongly recommend that it is linked to your home loan as an offset account. Once you have your bad debt under control and 2 months in gross income saved, then you are in a stronger financial position to start investing the 10%.

While all of the above is great advice the most important piece of advice we can give you is to be honest with yourself and hold yourself to account when looking over your budget to see if there are any major variances between what you budgeted for and what the actual expense incurred was.

Tips For Reducing Debt and Increasing Your Home Equity

When it comes to reducing debt and increasing the equity in your home, there are several practical strategies that homeowners can employ. You might ask. 'What is home equity?' Home equity is the difference between 80% of your property value and your current home loan amount. For example, if your property is worth $1,000,000 (80% = $800,000) and your home loan is $600,000, then effectively the equity in your home is $200,000.

While we have been reading mostly about budgeting, there are other strategies that you can implement to reduce your home loan fast and increase the amount of equity in your home. The first strategy is utilising an offset account to reduce interest payments. This type of account is linked to the home loan, and the balance of the account is offset against the loan balance, effectively reducing the interest charged on the loan. A homeowner has a $800,000 loan and $200,000 in their offset account, they would only be charged interest on $600,000 of their loan. By leveraging this strategy, homeowners can save on additional interest and expedite their journey towards reducing the principal of their home loan rapidly.

The next strategy is changing your payment frequency from monthly to fortnightly or weekly. We recommend that your home loan payment frequency should be in line with your pay frequency from your employment. However, by changing your repayments to weekly you are changing your total number of repayments throughout the year from 12 to 52. This is an optimal way to kickstart your homeownership journey without having to repay more.

'How does this work?' you might ask. Lets say your monthly repayments are $5,000 per month, totaling $60,000 per year. If you change your repayment frequency to weekly, you will be repaying ~$1,154 off your home loan weekly, which still equates to $60,000 per year, however you will knock off 7 years off your loan term. These practical strategies can empower homeowners to proactively manage their finances and achieve their home loan repayment goals.

Conclusion and Encouragement

Budgeting is one of the most important tools homeowners can use when looking to achieve homeownership. In this article we have covered the importance and benefits of budgeting and put together a blueprint for you on how to start your own budget.

As mortgage brokers and tax accountants we offer our client a bespoke plan on how to pay off their home loans using budgeting as the main tool. By paying down your home loan sooner you are able to increase the equity in your home. The equity in your home can be used as leverage to purchase investment properties or to fund a lifestyle goal.

The question you have to ask yourself now is 'Where do you see yourself in 2,5 or 10 years?'. By not taking action there's a great chance you are going to end up in the same position however, by taking action you could be well on your way to achieving what you thought was impossible! 

If you have any questions please do not hesitate to book a no obligation discovery call with us today!

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