This week we decided to go with another installment from Canna Campbell, a licensed financial adviser, best known for her YouTube channel Sugar Mamma.
In her video, Canna lists her top ten tips to pay off your mortgage faster. With a personal goal of paying off her mortgage in 10 years as well as her financial know how, Canna is by far an expert when it comes to decreasing your mortgage ASAP!
1. Keep it simple
When obtaining a mortgage, especially for the first time, it’s easy to be drawn in by what the bank is telling you and sign up for extras like credit cards and lines of credit which can incur large fees. Canna believe that these accounts only act as a distraction and can therefore hinder your ability to pay off your mortgage quickly. She suggests skipping the bells and whistles and going for a simple mortgage with just principle and interest.
2. Check your mortgage
After every repayment, check your mortgage and watch it go down. Canna explains that in the first year, the majority of your repayments will go towards paying interest and will therefore not have a large effect on your principle. But once this large sum begins to go down and your repayments allow you to chip away at it, this is one of the more rewarding feelings.
3. Increase your mortgage repayments
Where possible, Canna advises to increase your mortgage repayments in order to save money in interest. By increasing your repayments by $50 a week, the cost of buying lunch every day at work, someone with a $400 000 mortgage with an interest rate of 6.5% over a 30 year term can save a whopping $120 000 in interest repayments over the life of the loan as well as helping you pay off your mortgage 6 years sooner. In order to find areas where you could spare a little extra cash, Canna recommends looking over your expenses and reducing or eliminating any that are unnecessary.
4. Pay lump sum amounts where possible
Contributing large sum payments towards your mortgage is another great way to reduce the amount of interest you’ll have to pay and help you pay off your mortgage a lot quicker. This could be things like a tax return, bonus or commission cheque.
5. Maintain mortgage repayments
One of the most important tips Canna gives is to always maintain your repayment amount. Throughout the life of the loan, interest rates are sure to change and if they lower, the bank may encourage you to lower your repayments. Canna advises against this and says that by maintaining your current repayment amount, you will be paying of the principle of your mortgage sooner, therefore incurring less interest.
6. Start today
It is never too early or too late to start working towards paying off your mortgage, but the sooner you start the more you’ll save. Canna refers to her example of the $400 000 mortgage with the extra $50 a week in repayments, if those repayments did not begin until the eighth year of that mortgage, the total savings would only be $56 000 as opposed to $120 000.
7. Pay fortnightly not monthly
With 26 fortnights in a year and only 12 months, Canna recommends opting for fortnightly payments as this will allow you to make an extra payment every year towards your mortgage.
8. Shop around
Canna advises that you shop around for the lowest interest rate possible when taking out your mortgage, the difference of even 0.5% could mean savings of tens of thousands over the life of your loan. If you do refinance your mortgage at any point, she recommends reducing the loan term to coincide with the amount of time you’ve already had your mortgage for instead of starting again with the original term.
9. Put savings in offset & redraw accounts
If you have extra savings lying around, then putting these in an offset or redraw account against your mortgage is another way to increase savings by once again reducing the amount charged in interest.
10. Understand the importance of paying off your mortgage fast and make it your number one goal
By understanding the benefits of paying off your mortgage faster and the financial freedom this will provide, you can now focus on making this one of your main goals. Not only will you save yourself tens if not hundreds of thousands of dollars, but you will also be able to pay your mortgage off much faster and no longer be a slave to the bank or your mortgage.
Below you can find Canna’s full video on how to pay your mortgage off fast. If you are thinking about getting a mortgage or refinancing your current loan, give us a call on 07 3211 7744 and speak to one of our award-winning brokers today.
*Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.