After dealing with so many investors – we’d thought we’d share some tips that we’ve found can help you pay off your mortgage faster, save big of dollars and beat the banks at their own game.
1. Add a little, often to your repayments
If your mortgage repayment is $1,000 organise to increase this payment to a figure you can still afford, say $1,200. This small amount slowly adds up and before you know it reduces your interest payable and takes years off your mortgage. The extra payments act as a “mini insurance policy”. The buffer created may help you out of an unforeseen emergency or help you cope if interest rates rise beyond expectations!
2. Make lump repayments or mini lump sum repayments
If you cannot budget for a regular repayment increase [as detailed above] budget for regular “bonus” payments into your mortgage. Plan to make these extra payments monthly, quarterly, even yearly. They will take time off your loan and save the total amount of interest you’ll pay on your mortgage.
3. Ensure you use a mortgage offset account
A mortgage offset account is an account attached to your mortgage. While the offset account has money in it, your home loan is reduced by that amount. This means instead of having this money sitting in another deposit account – earning meager interest, it sits against your mortgage – reducing the total amount of your loan and your interest bill. With mortgages – every little bit helps!
4. Never redraw money off your mortgage
It won’t hurt, just taking a little bit out of your mortgage equity? Right? Well, no. [unless it’s something really urgent/life threatening/vital]. All you’ll end up doing by redrawing on your mortgage for furniture, holiday, car or clothes, is creating a new habit of redrawing. All this will do is extend the life of your mortgage and add to your interest bill.
5. Refinance every couple of years
With mortgages – everything changes – and often. New players enter the market, some old timers decide to get more competitive, special offers appear to lure you. What was perfect for you 2 years – may not be the best fit today. A little time researching mortgage providers and their options could save you thousands off your mortgage.
6. Do it more often
Pay fortnightly – not monthly. It means you effectively pay an extra repayment per year which helps reduce your interest expense.
What is your favourite mortgage busting tip – let us know in the comment below
Property Friends is a specialist Property Investment Advocacy that has been operating for the last 13 years on the basis of 3 principles: Trust, Community & Progress. www.propertyfriends.com.au (03) 9758 5331
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