Surprisingly, learning how to pay off your mortgage faster could be simpler than many homeowners would initially think – so where do you start?
While purchasing a property could be the most significant investment you can expect to make in your life, the home loan that comes with it could be the biggest debt one can also expect to take on too.
Whether you’ve recently had a mortgage approved or you’re already busy chipping away at your repayments, the good news is that there are a wide variety of tools to deploy that may shorten the life of your loan.
Five Tips On How To Pay Off Your Mortgage Faster
While many of us are busy chasing the ‘Great Australian Dream’ of home ownership, we’re often too busy to pay attention to the amount of interest that we’re actually paying on top of the loan amount. Here is an example of exactly why you shouldn’t ignore your interest rates. If you borrowed $500,000 today for a home loan at 3% interest over 30 years, this actually adds up to just over $762,000 over the three decade loan tenor – if that doesn’t motivate you into trying to pay off a home loan faster, we’re not sure what else will.
However, learning how to pay off your mortgage faster involves much more than monitoring interest rates. From your lifestyle choices to the way the loan is actually set up from the very beginning, there are many options for homeowners to speed up the loan repayment process.
Get An Offset Account – In simple terms, the basic function of an offset account is to use up to 100% of the balance of a linked transaction account to ‘offset’ – or effectively reduce – the portion of your home loan that is accruing interest. It’s like having a savings account linked to your mortgage, which in turn could significantly lower the amount of interest you pay and is one of the most helpful methods when it comes to knowing how to pay off your mortgage faster.
Stop Paying Monthly – If you are paying your mortgage monthly, take your salary payment frequency into consideration to match your mortgage repayment cycle. By paying half of the monthly amount every two weeks, you’ll make the equivalent of an extra month’s repayment each year – it all adds up. It’s also uncommon for Australians to be paid monthly, which may add an extra layer of pressure when it comes to repayments. Try to swap to a regular payment timeframe that matches your pay day.
Make Extra Repayments – While this may seem like a no brainer, it requires a conscious decision (and effort) to prioritise your outgoing bills. Even by rounding up your repayment to the nearest $50 could be far more efficient way of saving monies in the long term. It’s also a good idea to get in the habit of making lump sum payments whenever you can, such as utilising your tax return, any surprise bonuses, and even inheritance funds.
Stick To A Budget – No doubt you saved religiously when saving to buy a house, but did that all go out the window once you actually got the loan? It might be time to revise your outgoings and current expenses to see if there’s even an extra $50 a week that could go towards your mortgage instead. Make the most of the current record low interest rates, and throw as much as you can towards the principal amount linked to your home loan.
Get A Loan Check Up – At least once a year, put aside time to meet with your bank manager or mortgage broker for a loan check up. Your financial position may not be the same as it was twelve months ago, and your loan should be regularly revised to ensure it’s the best fit for you. It’s also a great opportunity to ensure that your finger is on the pulse when it comes to loan terms and interest rates, as there may be better loan products available to you.
Get The Right Advice The First Time
With a background in banking, finance, business development and project management, there’s no better advocate to have on your team than Nikki Berzin. As a fully qualified mortgage broker and director of Cherry Lending & Finance, Nikki is passionate about all things finance, and empowering her clients with the tools to hit their property goals is what she does best.
If you’re looking to get into your first home, purchase an investment property or even want to look at your options for refinancing, the first step is starting the conversation. Get in touch with Nikki today, or call her directly on 0427 374 155 to bring your mortgage dreams to life.
Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Subject to lenders terms and conditions, fees and charges and eligibility apply.
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Interest Rate Disclaimer: The Information is general in nature and does not take into account your particular investment objectives or financial situation. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the Information without first seeking expert financial advice. Cherry Lending & Finance does not represent or guarantee that the Information is accurate or free from errors or omissions and Cherry Lending & Finance disclaims any duty of care in relation to the Information and liability for any reliance on investment decisions made using the Information. The Information is subject to change