October 21, 2014
While most borrowers aim to pay off a mortgage earlier than the contracted term, the thought of taking out a mortgage for 25 to 30 years can be pretty scary.
But it doesn't have to be this way, because with a little planning and discipline, you can pay off your mortgage earlier with out missing out on all of life's luxuries.
Whether you have a mortgage already or are planning to in the future, we've put together some tips and tricks to help you pay off your mortgage sooner rather than later.
Change your repayments from monthly to fortnightly
Halving you monthly repayment and paying it fortnightly will save you thousands of dollars in interest costs. This is because there are 12 months and 26 fortnights in a year. So paying fortnightly means you will make the equivalent of 13 monthly repayments per year.
Cut down on treats
Small amounts make a big difference. For example, cutting out one bought coffee per day will save you $40 per fortnight. If that $40 is added to your mortgage repayment, you could potentially shave more than 3 years off your loan term and save more than $32,000 in interest over the life of your loan*
Use an offset account
Having your salary paid into an offset transaction account means that every dollar you keep in this account is offset against your loan balance on which the interest is charged. used carefully, this can put you thousands of dollars ahead on your repayments.
Use your redraw wisely
A mortgage with a redraw facility let you take out any extra payments you've paid into your home loan. While it can be tempting, redrawing these extra payments will reduce the interest savings you have made.
Have an annual home loan health check
It makes sense to have us check that your home loan is still the best option for you. In today's competitive market, lenders are forever offering competitive deals that may help reduce your loan term with lower interest rates and fees.
For further assistance and tips on reducing your loan term, call us today on 03 9432 6070 or click on the 'contact us' tab at the top of this page.
*Calculation based on a $300,000 principal and interest loan at 5% with extra contributions made from the first year of a 30 year loan term.