A lot of lenders (well, all reputable ones at least) will give you the option of repaying your loan early, though there are a few things that you will need to be mindful of if this is what you’re looking to do.
Each loan usually has a fee when the loan is finished. This means that if it’s fully repaid and discharged, you might have to pay a fee. This fee is always disclosed in your loan contract and tends to represent the costs involved in wrapping up your loan. For a home loan, this isn’t a lot of money and can usually range in the $500-ish mark plus any additional legal fees.
For a more accurate amount, ALWAYS check your loan contract. You’ll find it under the section on fees and is most often called a “discharge fee”.
Paying more that you’re supposed on your scheduled repayments is different from paying out your loan. While it’s good practice to make additional repayments if you can do it (as you will build up a buffer) it’s not repaying your loan early.
You can get caught out with an unexpected cost of paying off your loan early depending on the type of loan that you opted for.
If you have a Fixed Rate home loan and you are looking to pay off your loan, a fee can be charged by the lender called a Fixed Rate Break Cost and it will apply to any portion of a loan that is on a Fixed Rate.
This fee can be fairly significant as it represent the loss the lender experiences when they agree to lend you the money at a fixed rate. If rates have gone up a lot, well – they might have actually lost money by lending it you.
So, make sure you read your contract before you decide to repay your loan early.