28/07/2022
Top 5 Tips to pay off your mortgage sooner....
1. Make payment of your home loan always the top priority
2. Avoid honeymoon low interest intro deals
3. Consolidate other debts to one loan -reducing other repayments
4. Pay lump sums on to your mortgage - eg bonuses, windfall gains
5. Make higher monthly payments than bank requires.
Your home loan is probably the biggest financial investment you will make, and you want it to give you a sense of security rather than stress.
While paying off your home loan might seem a considerable task, there are ways you can reduce your mortgage, and thereby reducing the interest you pay overall.
1. Make your home loan your priority
Whatever else is going on in your life, the payment set aside for your home loan should be sacred. Set a realistic regular amount to pay off your home loan and stick with a budget for your remaining income. It’s also a good idea to place any lump sums directly into the mortgage, so you can build equity and reduce interest payments. (If you have a redraw facility these extra payment amounts can be withdrawn if required)
2. Avoid “honeymoon” deals (low intro interest rate)
At first glance, some of these cheap rates can seem very tempting. However, once the honeymoon is over, you will find yourself facing a higher variable rate of interest which can mean that you lose any ground you gained with the earlier low rate. These lenders also often set expensive exit penalties, so can be costly to walk away from the scheme.
3. Consolidate your debts
Rather than paying off multiple credit cards at varying rates of interest, consider a debt consolidation loan where you combine all your debts into one payment. This generally comes with the benefit of lower interest and it is definitely more efficient than keeping track of multiple repayments. By paying all your other debts off more cheaply and efficiently, you can focus on repaying your mortgage payments faster.
4. Place lump sums in your mortgage account
By paying any lump sums such as bonuses or inheritances straight into your mortgage, you reduce the capital, thereby reducing the interest you need to pay in the long term.
5. Pay off the principal / Make repayments at the higher rate
Your goal with your mortgage is to pay off the principal as this will reduce the interest on your loan. Every dollar you pay above the repayment account cuts down the overall amount of your loan, reducing your interest payments over the long term.
Three approaches to speed up paying off the loan are:-
A. Paying off the loan over a shorter time period than necessary. This way, you will make substantial savings by reducing the interest you have to pay, simply by increasing your regular payment.
B. Pay off the loan as if you are dealing with a slightly higher rate of interest. This way, you will reduce the principal and you won’t feel the pinch if the interest rate does rise.
C. Make more frequent payments, as this also reduces the principal more quickly.
With different loan products and incentives released regularly, you can benefit from regular expert advice from a mortgage broker to ensure you maintain the best possible strategy to reduce your home loan faster.
