Owning your house outright can bring immense financial freedom and security. While it may seem like that day is still a long way off for you, it is possible to get your mortgage paid off sooner and save yourself quite a significant sum in interest repayments without extreme budgeting. Read on to find out how.
1. Never Reduce Your Repayments
If your minimum repayments decrease with interest rate cuts, it may be tempting to pocket the extra money. If at all possible, keep repaying the original amount off your mortgage. $20 or $50 a repayment might not seem like a lot of money in the grand scheme of a loan worth several hundred thousand dollars, but every little bit adds up. Even the smallest extra repayments can potentially shave up to two years off the time it takes you to repay your mortgage.
2. Make Your Loan Work For You
Refinancing home loans is much easier now than it was in years gone by. Don’t get complacent with your mortgage. Do some research and perhaps take a look at wholesale lenders to see what can be offered and what can work best for youInterest rate fluctuations can make a variable rate the better option than fixed, and lenders are constantly updating their range of mortgage products. Even if it’s only been a couple of years since you took out the loan, there may be a better option available for you so do some research – a site such as the BOQ website will have the latest home loan rates and information about how to check if your loan is right for you.
3. Get Paid Into Your Offset Account
Most people know that using a mortgage offset account to keep savings in will reduce the amount of interest payable on their loan. Unless you have restrictions on withdrawals from your offset account, having your wages paid into it rather than a regular transaction account can really add up as interest is usually applied at the end of the month, but calculated daily.
4. Track Your Spending
Check your outgoing expenses against your budget regularly and make sure you’re on track. Sometimes you don’t realise how much those little amounts like a takeaway coffee or other incidental spending can really add up. It’s important to allow money to live a little, but knowing where your money is going can help you to identify possible ways to curb some areas and redirect a little extra onto the mortgage repayments.
5. Pay Large Chunks of Money Off Your Mortgage
Try not to incorporate lump sum payments in your household budget. If you can bank your tax return or bonus cheque against your mortgage, you’ll not only save yourself in interest but also potentially knock a year or two off your overall loan repayment time.
Short of a lottery win, most of us aren’t going to be able to pay off our home loans overnight. But with a bit of focus and budget discipline, getting it paid off in a shorter timeframe than the original term isn’t unattainable.
What’s your best tip for getting the mortgage paid off sooner?
