One of the biggest financial investments you will make is securing a home loan. Paying off your mortgage as quickly as you possibly can always makes financial sense. It gets a huge burden off your shoulders and allows you to effectively manage your finances for growth and other investments. So how exactly do you pay off your mortgage faster than planned?
5 Tips for Faster Mortgage Repayment
Check out some simple steps on how you can significantly slash years off your current home loan and mortgage:
- Make Extra Repayments
Paying extra helps you chip away at your current loan balance. This also helps you shorten your years of paying off your mortgage. Take note that paying just the minimum in the first years usually repays mostly interest. It would therefore take years before you can seriously take off on the loan balance. However, small extra repayments go straight to significantly reducing the balance and cutting your interest cost for the coming years. Increase your repayment and you will save time and money on your mortgage.
- Fortnightly Instead of Monthly Payment
It makes financial sense if you make more frequent payments in order to quickly pay off your property mortgage. Paying fortnightly instead of monthly reduces the cost and term of your home loan. You also avoid the burden of paying off the interest. Fortnightly payment is a sound financial strategy. If you have the money to pay as frequent as possible, then do it. You can split your payments into two per month. Thus, if there are only 12 months but 26 fortnights in a year, your fortnightly payments would mean making 13 monthly payments in a year. It makes a world of difference over the term of your mortgage loan.
- Use an Offset Account
An offset account is a transaction account that is linked to your loan account. The amount in your offset account is subtracted from the payable or principal on your home loan. For instance, if your loan principal is $100,000 and your offset account contains $20,000, you basically pay interest rate based on $80,000. It significantly reduces the amount of your interest, saving years on the loan term.
- Rent Out a Spare Room
Boost your income through renting out a spare room in your house. The rent money would definitely come in handy especially in making extra repayment for your mortgage. Use your extra cash mainly to pay off a little extra on your home loan. The extra payment could cut years in your mortgage term.
- Review your mortgage regularly
What was perfect for you a couple of years ago might not be the best for you a year or two from now? Your circumstances may have changed, Interest rates may drastically change or you may want to reconsider variable or fixed rates. Important factors in your mortgage need evaluating every now and then, so it’s worth 15 minutes a year to review your mortgage.
The first step to effectively pay off your mortgage much quicker than expected is through consulting a reputable and seasoned mortgage broker. Speak with us for details and for a complimentary review!
Regards, Daniel Reid – Director, Emanate finance