When was the last time you looked closely at your loan, the progress you are making on paying it off and how it compares to others in the market? Checking out your mortgage could mean savings for you, as well as the opportunity to pay it off quicker, allowing you to invest in property or reach financial freedom sooner.
Make smaller payments more often
Consider cutting the size of your payments, make more of them. This could see you pay off your loan faster, and therefore pay less interest over time.
If you pay your mortgage monthly, consider changing to fortnightly repayments. For example, if your mortgage equates to $2400 a month, cut this in half and pay $1200 each fortnight. As well as having more manageable payments to make, by the end of the year you will have paid off $31,200 rather than $28,800.
Pay just a little bit extra
A minimum repayment is just that – for most loans there is no reason you can’t pay more, whether here and there or regularly.
By rounding up to a full number or contributing an extra $100 or even $10, you’ll significantly reduce your mortgage. It may also be worth considering putting all bonuses, tax returns and gifts into your mortgage.
Try out apps like Up or wisr to round-up small amounts on small purchases. You won’t miss the small change.
Don’t decrease repayments when interest rates fall
Even if your repayments are lower when fees and interest rates decrease, it doesn’t mean that’s all you have to pay. By keeping your repayments the same when interest rates are lower, you will pay down more of the principle with each payment, significantly reducing your loan term.
If you can, use an offset account. A mortgage offset account is linked to your loan and the interest payable on the loan from month to month is calculated by deducting what is in your offset account from your current loan on a daily basis. For example, if your mortgage is $500,000 and your offset account has $10,000 in it, you will only pay interest on $490,000.
An offset account will save interest while still giving you access to your savings. It also means investors can preserve the tax deductibility of the mortgage. Remember that interest is calculated daily, so the sooner you have your salary or other cash into your offset account the better. Leaving payments until as late as possible further reduces your interest costs.
Find a better deal
Ultimately, your mortgage needs to suit you and your circumstances, or you will wind up paying too much. If you think your current loan no longer matches your situation, speak to me today.
If you have had a loan for longer than two years, you are probably paying too much.
Pay down non-deductible debt
You will need your accountant’s advise on this, but please check out your options.
Consolidate expensive (bad) debt
Credit cards, car loans and personal loans all cost you more than a home loan. Stop paying too much. Look to consolidate these debts, but keep the previous monthly repayments the same.