In the interest of keeping it brief, here are the top five 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, fast!
Not many of us want to have a mortgage hanging around for 30 years, so here is First National Marlborough salesperson Hiram Taylor with five top ways of reducing that loan faster.
1. SET YOUR PAYMENTS HIGHER
So your mortgage is $1000 every fortnight? Call your lender and set the payments at $1200 if you can afford it. “Just that $100 per week extra will slowly add up, reduce the interest you pay and slash the mortgage by many years,” Hiram says. “It also creates a really nice safety net, or buffer, in case rates rise and you struggle to meet your repayments.”
2. ENSURE YOU USE A MORTGAGE OFFSET ACCOUNT
This won’t save you thousands a year, though it will save you hundreds. How it works:
● Your savings and everyday accounts are attached to your mortgage account.
● Whatever balance is in those account offsets your mortgage balance
● You pay interest only on the difference. reducing the amount of interest you pay.
3. MAKE LUMP REPAYMENTS OR MINI LUMP SUM REPAYMENTS
Make extra payments on your mortgage.
“By making an extra $50, $100 or $200 payment into your mortgage account every so often, you’ll find it all adds up and gets that mortgage, and interest, down faster,” Hiram says.
4. NEVER REDRAW MONEY OFF YOUR MORTGAGE
It might be tempting to draw back some of that hard earned mortgage money, though remember it will bite you in the long run.
“I 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,” Hiram says. 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 could 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 as 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.