Owning your own home may be the Australian dream, but to achieve this dream most Aussies need to take out a mortgage, which can be a huge financial commitment over many years. However there are ways to pay off your mortgage sooner and in this article we explore ways to get the “mortgage monkey” off your back early – that doesn’t include winning the lottery!
Get Motivated
Why do you want to pay off your mortgage early? Besides possibly saving many thousands of dollars, what could you actually do with the money you save? If you are dreaming of an overseas trip, perhaps purchasing an investment property or sending your kids to the best schools, then these are great motivators to paying off your mortgage early.
How to get ahead on your repayments
- Pay Fortnightly – by switching your payments to fortnightly instead of monthly, you will effectively be getting ahead on your home loan by one monthly payment every 12 months.
- Make extra payments – if the budget allows, paying extra on your fortnightly payments can make a big difference. Consider “rounding up” each payment. For example, if your mortgage payment is $860 per fortnight consider rounding up to $900 per fortnight.
- Negotiate a better interest rate – Interest rates are at an all-time low in Australia so make sure you are taking advantage of this. Ask your current lender for a better interest rate or consider re-financing. If you can manage to shave a few percentage points of your interest rate, but still continue to pay the same repayments, you will be able to make a significant impact on paying off your mortgage sooner.
- Refinance a shorter term loan – paying your loan off over a shorter period will mean your repayments will be higher but it also means that you will pay a lot less interest over the life of the loan. Play around with a mortgage calculator to see how much you’d have to pay by reducing the loan term until you come up with a figure that fits in with your budget.
- Put any windfalls into your mortgage – adding windfalls into your mortgage such as tax refunds, gifts or small inheritances can make a big difference. If you get a pay rise, consider adding the extra money to your mortgage repayments.
- Review regularly – home loan products are constantly changing and evolving, as are your own financial circumstances. It is important to not become complacent and review your mortgage regularly to ensure you are still getting the best deal to suit your personal circumstances.
By following these tips you will be well on your way to paying off your mortgage sooner.
Need help? Contact us at Hunter Lending Solutions to arrange a confidential chat.