A mortgage is generally one of the largest and most daunting expenses you may face in your lifetime, however, there are a few little things you can do to decrease the length of your mortgage term and get out of debt faster.
If you want to pay a little more without increasing your monthly payment; there is a commonly used strategy. You could continue paying $2,000 a month for 12 months, therefore paying off $24,000 per year. Or, you could halve your monthly payment and pay
$1,000 a fortnight over 26 weeks. This will increase your yearly payment to $26,000. You will have paid an extra four weeks and an additional $2,000 without noticing.
Get a health check
If you’ve been sitting on the same mortgage repayment plan for a while, it might be time to take another look. Interest rates may have improved, there may be a more suitable payment plan or you might need to consolidate debts again. A variable interest rate loan will give you more flexibility, however the interest rate can move up or down according to the market. For those who prefer the security of locking in an interest rate for a set period, a fixed rate loan would be beneficial. There is also the option of splitting your loan across these two interest rate options which will lower your interest if the market is in your favour, and decrease the impact the market has on your loan if interest rates creep up. You can contact the experts at Mortgage Express to make sure your payment plan suits you and your needs.
Consider if a purchase is a need or simply a want. If it’s the latter, think about the difference that $50 a week could make to your mortgage. It could be as simple as going out for dinner once a week instead of twice. Putting away that extra $50 each week could pay $2,600 off your mortgage each year.
Lump sum payments
Check if your loan allows you to make additional payments. Making the occasional lump sum payment after tax time or receiving a bonus at work can lower your interest and reduce the length of your mortgage term.
Think about setting up an offset account to lower the amount of interest you are paying. If you have a loan of $200,000 with $50,000 in your offset account, you will only pay interest on $150,000. This option can take years off your mortgage.
Don’t lower repayments
Choose not to lower your repayment amounts if you are given the option. You will pay off your mortgage and be out of debt a lot sooner.