In the past few weeks I have been reading a couple of books on ways to pay off your mortgage early and in turn save money on interest repayments. It made me rather excited in honesty, the idea of looking to kill your biggest debt (that of your mortgage) and become mortgage free.
I have a million and one other things I could better use that money for if I had the chance. Don’t you? What would you do if you had no mortgage repayment, owned your own property and rising disposable cash on hand?
While these books are rather small and easy to read, most of the tips are rather practical and while almost seemingly general knowledge, they show the power of strategy when it comes to paying off your mortgage early. Numerous tips on what you can do to leverage your money further and attempt the impossible – repaying your home loan as early as possible.
The books on how to pay down your mortgage faster
The two books I read are titled: How to be mortgage free in 4 easy steps by Harj Gill & Own your home years sooner by Gill & S Therry.
What do these books teach you about paying off your mortgage quickly?
They list numerous ways to reduce interest. Obviously, the interest is the one thing that gets in the way of you paying off your mortgage as fast as possible. This means the strategies largely revolve around ways to reduce the interest payable, so your money can work harder at paying off the principle of the loan.
Here are some of the tips they suggest you use to repay your home loan years sooner (in one of their case studies, a couple went from a 25-year mortgage to that of a 16-year mortgage – that’s 9 years better off)
Pay your mortgage fortnightly to reduce interest
Doing this cuts down on added up interest and will save you A LOT of money over the course of your home loan. If you are super game, pay your mortgage weekly!
Pay a lump sum twice a year towards your mortgage
If you get $2000 back from your tax return, make a large payment towards your mortgage. These large lump sums cut years of interest off the loans.
Increase the rate of your regular mortgage repayments
You can cut up to 2 years off your loan by paying an extra $20 to $50 in some instances, though you will need to use a home loan calculator to check.
List your regular expenses and where you spend your money
Look to remove 1 or 2 items from your daily spending patterns and calculate what that means on a weekly or fortnightly basis – grab that amount from your paycheque and add it towards your home loan instead.
If you are yet to get a mortgage, start saving money immediately
The deposit isn’t just a nice to have or prerequisite from most banks, it enables you to reduce your loan amount before you obtain the loan. If you can even reduce your home loan by $500 by simply saving that money before applying, you can save yourself a lot of interest by not having that money incorporated in your home loan.
Make sure you have an offset account or fee free redraw facility
A mortgage offset account means that any excess cash you have will be counted on a daily balance and offset against your home loan. This means your everyday transaction account, which has maybe $200 in it – will effectively help you reduce your debt by $200 and the interest that applies to it. Read more about mortgage offset accounts.
A fee free redraw facility means you can store extra money inside your home loan to reduce the interest you pay, without been penalised should you need to redraw the cash at a later stage. A great place to keep your savings or perhaps rainy day fund while you don’t need it.
Sometimes you need to admit your loan is bad
Perhaps you got done. Perhaps loans have just got better since you applied, regardless you may just need to refinance as soon as possible, this is called mortgage refinancing. Go to a home loan lender and get them to do the hard work for you by searching for a better deal and explaining the savings you will make.
Consider using sites like HashChing to compare home loans. It’s a mortgage marketplace, whereby you can get access to low rate home loans that are not advertised anywhere else. I did this recently and saved a bunch of time and effort refinancing my home loan.
So what are the features of a good home loan according to the books?
Here are the features of a good home equity loan:
- Income can be paid directly into your home equity loan.
- You can make interest only payments.
- There are no early payout/exit fees.
- It is a life long facility.
- It is fully transferable to other properties.
- Same interest rates for personal & investment debts.
- You receive monthly statements to help you monitor the loan and check for mistakes.
What other strategies do you use to try and pay off your home loan early?
Drop us a comment below and tell us your tips. The more tips we can collect, the more help everyone will get with repaying their home loan years sooner.