In the interest of keeping it brief, here are some quick top 5 ways of reducing your mortgage quicker. I don’t know about you, but the idea of having my mortgage for the full 30 years doesn’t really excite me. Join me in finding a way to pay that sucker off, quick fast!
1. Set your repayments higher, always
So your mortgage is $1000 every fortnight? Call your lender and request that they take $1200 if you can afford it. It will slowly add up, reduce the interest payable and slash your mortgage by many years. It also creates a really nice safety net incase rates rise and you struggle to meet your repayments (it’s called having a buffer).
2. Ensure you use a mortgage offset account
This won’t save you thousands a year, though it will save you hundreds. A mortgage offset account is simply an account that is attached to your mortgage, meaning whatever dollar value sits in the account, your home loan is reduced by that amount. So instead of having your excess pay sitting in your everyday account each month, it technically sits on your mortgage, reducing the amount of interest you pay.
3. Make lump repayments or mini lump sum repayments
By taking a wad of cash, no matter how small or large and depositing it into your mortgage – you will save yourself thousands of dollars in interest over the long term. We have spoken about lump sum repayments previously, though if you struggle to find a space $1000 to $5000 to deposit onto your mortgage, why not occasionally drop $100 or $200 into the account? It will all add up over the long run.
4. Never ever ever redraw money off your mortgage
It may be tempting to draw back some of that hard earned mortgage money, though remember it will bite you in the long run. I personally would never redraw unless it was something life threatening. You will be forever in a cycle of debt if you continue to redraw your useable funds from your mortgage. Instead try budgeting your money more effectively to ensure you never have the need to scrape cash off your mortgage.
5. Refinance every couple of years
Rates change. The industry changes. Home loan rates occasionally get a boost far and beyond your current interest rates and fees. This means that shopping around is always your biggest friend. Keep a close eye on the market so that when you are ready and eligible (without getting stung for exit fees) you can pounce on a better deal. It may shave years off your mortgage and save you lots of interest.
Bonus mortgage tip
Ensure you pay your mortgage weekly or fortnightly, never opt for monthly. This will save you more interest there are only 12 months in a year, compared to 52 weeks per year or 26 fortnights per year. The more frequently you pay, the less interest you will attract.