Tired of feeling like you’ll be paying off your mortgage forever? Want to own your home outright sooner and save thousands in interest with a competitive mortgage rate? You’re not alone! While it might seem like a daunting task, there are several strategies you can implement to accelerate your mortgage repayments and become debt-free faster. Here are 5 effective ways to pay off your mortgage sooner according to Principal Accountant and Mortgage Broker Craig Naisbitt.
1 Switch to Fortnightly Mortgage Repayments:
Instead of making monthly repayments, consider switching to fortnightly repayments. By paying half your monthly repayment every two weeks, you’ll effectively make an extra month’s worth of repayments each year. This simple change can significantly reduce the life of your loan and save you a substantial amount in interest.
Craig’s Take: “Fortnightly repayments are a powerful tool. It’s like making 13 full payments a year instead of 12, and that extra payment goes directly towards your principal, slashing interest and time off your loan.”
2 Make Extra Mortgage Repayments:
Whenever possible, make extra repayments towards your mortgage. Even small additional payments can make a big difference over time. Consider rounding up your repayments or making a lump sum payment when you receive a bonus or tax refund.
Craig’s Take: “Think of extra repayments as an investment in your future. Even $50 or $100 extra a month can make a significant difference over the life of a 25 or 30-year loan. It’s about building equity faster and reducing the total interest paid.”
3 Find a Lower Mortgage Interest Rate:
One of the most effective ways to pay off your mortgage faster is to secure a lower interest mortgage rate. Even a small reduction in your interest rate can save you thousands of dollars and shorten your loan term. Regularly review your mortgage and compare rates from different lenders. Refinancing to a lower rate could be a game-changer. Have you seen our free mortgage calculators on our website? They can give you an indication on just how much you could be saving if you refinanced your current mortage intrest rate.
Craig’s Take: “Don’t be afraid to shop around and negotiate. Loyalty doesn’t always pay when it comes to mortgage rates. A lower rate means more of your money goes towards the principal, not just the interest.”
4 Make Higher Mortgage Repayments:
If your budget allows, increase your regular repayment amount. Even a small increase can make a significant difference in the long run. Calculate how much extra you can afford to pay and commit to a higher repayment schedule.
Craig’s Take: “A little discipline goes a long way. Increasing your repayments by even a small percentage can significantly impact your loan term and the total interest paid. It’s about making conscious decisions to accelerate your payoff.”
5 Consider an Offset Account:
An offset account is a transaction account linked to your mortgage. The balance in your offset account is offset against your loan balance, reducing the amount of interest you pay. By keeping your savings in an offset account, you can effectively reduce your loan principal and pay off your mortgage faster.
Craig’s Take: “Offset accounts are fantastic for those who are disciplined savers. It’s a smart way to leverage your savings to reduce your interest burden and pay off your mortgage quicker. Essentially, you’re getting the benefit of the interest rate without locking your money away.”
Bonus Tip:
Avoid interest-only loans if your goal is to pay off your mortgage quickly. While they may offer lower initial repayments, you’re not actually paying down the principal, which can prolong the life of your loan.
Take Control of Your Mortgage:
By implementing these strategies, you can take control of your mortgage and achieve your dream of homeownership sooner. Remember, every extra dollar you put towards your mortgage is a dollar less in interest paid to the bank. Give Craig at CLN Financial Services a call to discuss how we can help you refinance to start achieving your goal of home ownership sooner.
Disclaimer: It’s recommended to seek professional financial advice to ensure these strategies align with your individual circumstances.
Important Links:
https://www.rba.gov.au/
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