With lenders dropping their interest rates in recent weeks, the temptation to loosen the belt and lower repayments is high. But according to the Mortgage and Finance Association of Australia (MFAA) every dollar households can contribute goes a long way.

“People have been stretched to maintain their mortgage repayments in recent months and often the first reaction at a rate drop will be to spend that saving elsewhere,” says Phil Naylor, CEO of the MFAA.

“However, if you’re able to keep repayments up above the minimum instalments then it could potentially shave years off the end of your loan.”

Any extra one-off repayment like a tax return can also provide a healthy boost to a loan balance, and minimise the overall interest, says Mr Naylor.

“You can’t escape interest, but you can minimise its impact with the occasional lump sum payment. Instead of hitting the weekend sales with your tax return, consider making an extra mortgage repayment.”

“Understanding the structure of your mortgage is the key to paying it off sooner.”

The MFAA’s Essentials of Borrowing website gives borrowers some helpful tips on how to manage their mortgage. The site hosts information on what makes up a loan, some available loan types and payment methods and is designed to help people own their home sooner and avoid default.

“You may also choose to change the timing of your repayments slightly. A lot of people repay monthly to correspond with pay day. But if you can make repayments fortnightly or weekly it could cost you less over the term of your loan,” said Mr Naylor.

“Sitting down with an MFAA member who can explain all aspects of a loan can really help people to better understand their loan repayments.”

To help consumers better understand all the factors that surround borrowing, the MFAA has set up the Essentials of Borrowing - an educational website that walks people through all they need to know about loans. Visit www.essentialsofborrowing.com.au