It goes without saying that nobody likes to be locked into a mortgage for longer than they need to be.
If you’ve been thinking about what you’d rather do with your mortgage repayments, it might be time to build a strategy to say goodbye to your home loan sooner. It could save you thousands (even tens of thousands) in interest over the course of your loan.
While every case is different (and decisions should be made with sound professional advice), let’s talk about some of the things you could do.
Before we go into the ways of paying off your mortgage faster …
- You need to decide why you want to reduce the mortgage term – what is your end goal? Is it to be mortgage free in a certain period of time? To retire earlier? To move up the property ladder, perhaps into a bigger home? To buy a rental property? This will greatly determine which path is right for you. Believe it or not, there may be advantages in not paying off the mortgage faster!
- Take a good look at your budget. Know your cost of living and how much you are spending. Also, know yourself and how financially disciplined you are prepared to be. What are you realistically prepared to sacrifice? Only then can you make decisions on the best course of action.
- Get professional advice from a good Mortgage Adviser, which includes making a plan. Once you have a solid plan you can trust in it, and that shreds a lot of stress!
Here are some ways that you can start taking some chunks off your debt.
Extra repayments: early and often
Additional repayments can significantly reduce the term of your loan and the total cost of interest, and the earlier you start, the greater the potential savings. There are a few ways you can go about it. Increasing the frequency of your repayments, using the bonus from work (or other windfalls) to make a lump sum payment, or you might be able to increase your regular repayment amount. Not sure where to start? Contact us and we can talk through your options and help you understand what the impact of additional repayments would be on your mortgage.
Put your savings to work
If you have savings, you might like to consider using these to reduce your home loan interest costs. Here’s how it works: let’s say you have savings of $50,000 in an offset account or a revolving credit account and a home loan of $450,000, instead of paying interest on the total mortgage amount of $450,000, you could pay interest on $400,000. Interesting thought? Get in touch for more information.
Give your home loan a regular health-check
It is always a good idea to keep your mortgage top-of-mind and give it a regular ‘health-check’.
It’s not always a good idea to switch lenders based on interest rates. Penalties will apply like break costs and legal fees. These factors need to be weighed up as part of the equation. But by breaking your high fixed term rate (even if you are staying with your lender or moving to new one), there may be savings over the long-term. It can certainly be worth weighing up the pros and cons here.
If you think it’s time to check that you are receiving the best from your lender, get in touch for a complimentary home loan health-check and conversation about your mortgage options. Like interest rates, fees are negotiable, so if you’re looking at ways to pay your mortgage off faster, but are unsure about the associated fees, talk to us.
Restructure or consolidate your debt
This means reorganising multiple debts into a more manageable loan structure. This typically means combining several high-interest debts, such as credit cards and personal loans, into a one loan with more favorable terms. The benefits include simplified monthly payments, potentially lower interest rates, and reduced total interest costs over time. Our Mortgage Advisers can assist with structuring your lending to the best advantage for you.
A pinch of wisdom
Of course, one of the simplest ways to say goodbye to your mortgage faster is applying a sound savings/spending mentality to everyday life.
Review your outgoings and see if you can squeeze anything out of your budget that could go on the mortgage instead. Are you paying too much for power or internet perhaps? Could you sacrifice a few trips to the coffee shop? Maybe stop some of your streaming subscriptions. Even if it’s another $10 per week, it will help to reduce your debt sooner.
USE THE MORTGAGE EXPERTS IN YOUR CORNER
If you’ve given this some thought and decided that you’d like to say goodbye to your home loan sooner, come and have a chat with one of our professional Mortgage Advisers, we’re here to help. We can talk about the different approaches and options for your personal circumstances and goals. If you’re not in the position to make higher payments, our Mortgage Advisers will give you honest advice.
A disclosure statement is available, on request and free of charge.
Photo by Tierra Mallorca on Unsplash
