Securing a mortgage is the first thing…but once you have one, you’ll find yourself asking how do I pay this loan off quicker, how do I become debt free faster, I want financial freedom!
Let us reassure you this is quite a normal thought pattern, and the great news is, you can do something about it!
See our five tips below:
Offset the Interest You Pay
We work with you to ensure your mortgage is tailored to your needs and your situation. By using your income and savings in a positive way, to offset the interest you pay, can help reduce the life of your loan.
In essence, the total sum of your savings is deducted from your mortgage balance which reduces your interest costs and payments. For example, if you have a $400,000 mortgage and $20,000 in cash savings, you’ll only pay interest on $380,000.
Increase Your Repayments
I know, this one sounds obvious right? But it’s amazing how many people don’t do this and how great the impact is, if you do! If you can afford to, it’s beneficial to increase your payments even by a small amount, because a mortgage has a long-life span so even a small increase will help reduce your principle and the life of the loan.
Also, you could consider your loan as if it’s on a shorter period e.g. treat your 30 year term loan as though it’s 25 years and make repayments to match that. However, being assured that you have the flexibility to amend your repayments back to the 30 year term should your financial situation change.
Switch Monthly Repayments to Fortnightly
While on paper this doesn’t sound like it would alter anything but switching from monthly to fortnightly payments can help reduce the principal faster.
By paying every two weeks instead of every calendar month, you’ll effectively be paying two extra fortnightly payments a year that you wouldn’t be on monthly repayments.
Don’t Reduce Your Repayments if Interest Rates Go Down
When interest rates are lower, your minimum required repayments reduce. Rather than reducing your repayments to match this new minimum, keep your repayments the same. By retaining your original repayments, you’ll take a large amount of principle off your loan.
Be Open with Your Thinking
While traditionally, people have opted to go to large well known banks to secure a mortgage, there can be great benefit (and savings) by looking at smaller banks and non-bank lenders. Times have changed and banks are not always the best option for your situation. We’ve got over 50 years’ experience as independent financial advisers working with banks and non-banks, so can guide and advise you on lenders that are credible and best match your needs.
So, there it is, five tips to pay off your loan faster! We have more suggestions too, and make sure your loan is the best fit for you and your situation.
We are here to work for you. We can answer your questions, and after careful assessment, advise you on the most appropriate way forward.
Want to see if your mortgage is set up the best way for you? Contact us today for a FREE consultation.
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