Home loan interest rates have never been lower – and the only way to go is up. Even though most economists believe that an interest rate rise is months away, the opportunity to pay your mortgage off sooner (and save many thousands of dollars in the process) should be too good to pass up.
It’s a great idea, you say, but after paying monthly bills you are almost at the bottom of your account before next payday. Here are some handy tips to help you achieve your dream of owning your house sooner (and might even help fund your next property purchase)!
Regular extra payments
Make small, regular extra payments. It all adds up – if you can find even $100 to squeeze from your monthly pay, you can put this toward your home loan to pay it off sooner.
Set your monthly mortgage repayment higher than the minimum set by your bank. If you’ve had a variable mortgage for a while, you’ll notice that your repayments have dropped dramatically. If you’d kept repaying at the same rate as two years ago, you would be well on your way (and it’s better late than never)!
Use lump sums wisely
Put those occasional lump sums into your mortgage. When you get a tax refund, bonus from your workplace or even a small inheritance, these can cut years off of your loan and save you a packet on interest.
A home loan offset account is a must
Make sure you have an offset account. There’s no better place for interest to go than into your mortgage – the amount of money you will save by paying your loan off sooner can run into the tens of thousands.
Do it fortnightly
Changing from monthly to fortnightly repayments is the safest and most effective mortgage reduction strategy, by paying fortnightly you are effectively making a total of 13 monthly repayments over the course of a year, giving you one month’s extra repayment every year.
Review your loan with a mortgage broker
See your mortgage broker. What was right for you when you first bought your home may not be the ideal loan for your current circumstances. You may, for example, want to split your loan, or set a fixed rate or perhaps you’ve recently had a child and moved to one income, maybe you’ve changed jobs and have greater earning capacity – all of these factors can influence the relevance of your mortgage. There are a number of options that your mortgage broker can take you through.
Work out a strategy – now
The sooner you begin paying down your home loan, the better – it will never be more affordable to achieve you dream of financial freedom sooner than it is now.