31 Oct 2016
5 tips to pay off your Mortgage sooner
Every Australian family with a mortgage, wants to pay it off sooner. Do they actually do it? For many the ball and chain of a mortgage is a heavy one to carry around, especially for decades. Some people just accept their mortgage for what it is, make the minimum repayments and wait, wait, wait for the sum to be paid off and wish they could hurry things up. There are ways of speeding up the process:-
If you’re interested in paying off your mortgage sooner rather than later, here are five of the tried and true methods that help you get a real edge over your mortgage debt.
1. Make repayments according to your pay cycle
One sure fire tip is to make mortgage repayments when you get paid. If you get paid fortnightly, make your mortgage payments according to the same schedule. This cuts down on interest payable – you make 26 individual payments per year instead of just 12. These seem insignificant on paper, but they all add up.
2. Use a Mortgage offset account for your day to day banking.
An offset account is a transaction account that reduces the amount you pay in interest on your home loan. If you have a $300,000 loan and $100,000 in savings, your bank or lender only charges interest on the $200,000. The more you save on your offset, the less interest you have to pay. This can shave years off the life of your mortgage.
3. Have your salary paid into your offset
Interest in offset accounts are calculated daily – so having your salary sit untouched in your offset account for a few days a year can actually have a profound effect on your mortgage. This might save you a few extra hundred dollars per year. Every little bit helps!
4. Refinance your mortgage
In the Mortgage arena we utilise our professional mortgage connections to better serve the needs of our clients. We are finding that with interest rates at record lows (October 2016) and with many lenders eager to retain your business they are very receptive to fine tuning your current rate to match that of competitors. If you have not reviewed your current lending arrangements against that of the broader market speak with your financial adviser who can organise this on your behalf. Good preparation ahead of a discussion with your current lender. Noting that the market for your home loan is now bigger than ever before. Take advantage of competition to negotiate or lock in a refinanced mortgage that saves you more in the long run.
5. Use lump sum payments
If you get your tax return or a bonus at work, consider depositing the lump sum into your mortgage. These large payments can shave years off your home loan.
Make an appointment with your PSK financial adviser to:-
- Discuss how to negotiate repayment rates with your existing lender.
- Whether you should be looking at alternative mortgage providers.
- Understand the difference between “good” debt and “bad” debt
- Put in place a strategy to eliminate your personal debt in the shortest possible time.