Seven Ways to Pay off your Mortgage Faster
Did you know that the word "Mortgage" is derived from the two Old French words Mort, "death" and Gage, "pledge"? I.e. a pledge until death!
This month I am going to share with you some tips to paying off your mortgage quicker. If you follow these seven simple steps you will save many thousands of dollars and rid yourself of that death pledge while you can still enjoy life.
Step 1 - Set your mortgage up for fortnightly payments
This will shave almost 5 years off a 25 year amortized mortgage because you end up making 1 extra payment a year. However, to achieve this benefit you must make the amount of each fortnightly repayment exactly half your current monthly payment.
If your lender suggests another formula for working out the payment amount do the maths or take advice from your broker: E.g. the calculation (Monthly Payment x 12) ÷ 26 will not benefit you and preserve the lender's profits.
Step 2 - Make a lump sum payment
All variable rate mortgages will allow you to make lump sum payments when you can. Even fixed rate loans have some tolerance for a lump sum payment.
If you receive a tax payment or some other unexpected windfall use some or all of it towards your mortgage. This is especially effective if you have a newer mortgage because most of your regular payments in the early years cover interest: Pay off some of the principal with a lump some and the interest burden decreases.
Step 3 - Round up your payments!
You can save a good chunk of money over the life of a loan by rounding up payments e.g. to the nearest $10. Those extra dollars go directly to repaying the principal.
Step 4 - Keep your payments the same if mortgage rates fall
If you are accustomed to paying $700 fortnightly and your new mortgage rate lowers your payments to $675, keep paying the $700. Once again, the extra $25 each payment will go directly to the principal.
Step 5 - Increase your payment if your income increases
If you receive a raise each year, consider increasing your mortgage payment not just your spending. This will have the same effect as the above actions.
Step 6 – Ignore your current lender's marketing invitations to borrow against equity
Using your gained equity to buy depreciating assets like cars, holidays and furniture is a good tactic for lenders to keep you locked into that death pledge: The goods will be worthless by the time you have repaid your mortgage.
Step 7 – Regularly review your home loan
Ensuring your mortgage is keeping up with your financial situation is good practice. A good mortgage broker will take the legwork out of checking whether there is a better option for you. They will also confirm your new payments, advise how long the mortgage will run for and compare this to your current loans to ensure you win.
There are other tips and tactics you can use in addition to those above. Should you wish to learn more about how you can pay your home loan off faster give Suzy a call on 0411 528 440 or email suzy@bestfitfinance.com.au. Check our web page at www.bestfitfinance.com.au
This month I am going to share with you some tips to paying off your mortgage quicker. If you follow these seven simple steps you will save many thousands of dollars and rid yourself of that death pledge while you can still enjoy life.
Step 1 - Set your mortgage up for fortnightly payments
This will shave almost 5 years off a 25 year amortized mortgage because you end up making 1 extra payment a year. However, to achieve this benefit you must make the amount of each fortnightly repayment exactly half your current monthly payment.
If your lender suggests another formula for working out the payment amount do the maths or take advice from your broker: E.g. the calculation (Monthly Payment x 12) ÷ 26 will not benefit you and preserve the lender's profits.
Step 2 - Make a lump sum payment
All variable rate mortgages will allow you to make lump sum payments when you can. Even fixed rate loans have some tolerance for a lump sum payment.
If you receive a tax payment or some other unexpected windfall use some or all of it towards your mortgage. This is especially effective if you have a newer mortgage because most of your regular payments in the early years cover interest: Pay off some of the principal with a lump some and the interest burden decreases.
Step 3 - Round up your payments!
You can save a good chunk of money over the life of a loan by rounding up payments e.g. to the nearest $10. Those extra dollars go directly to repaying the principal.
Step 4 - Keep your payments the same if mortgage rates fall
If you are accustomed to paying $700 fortnightly and your new mortgage rate lowers your payments to $675, keep paying the $700. Once again, the extra $25 each payment will go directly to the principal.
Step 5 - Increase your payment if your income increases
If you receive a raise each year, consider increasing your mortgage payment not just your spending. This will have the same effect as the above actions.
Step 6 – Ignore your current lender's marketing invitations to borrow against equity
Using your gained equity to buy depreciating assets like cars, holidays and furniture is a good tactic for lenders to keep you locked into that death pledge: The goods will be worthless by the time you have repaid your mortgage.
Step 7 – Regularly review your home loan
Ensuring your mortgage is keeping up with your financial situation is good practice. A good mortgage broker will take the legwork out of checking whether there is a better option for you. They will also confirm your new payments, advise how long the mortgage will run for and compare this to your current loans to ensure you win.
There are other tips and tactics you can use in addition to those above. Should you wish to learn more about how you can pay your home loan off faster give Suzy a call on 0411 528 440 or email suzy@bestfitfinance.com.au. Check our web page at www.bestfitfinance.com.au