How to Pay Off Your Mortgage Faster
Loans are the types of debt you pay for a certain period of time, sometimes for years, like a home loan. Everyone dream of having their own home despite having to pay for it for years. However, it’s possible to pay off your home loan faster and here are some ways to do just that:
Pay charges and fees up front.
While it’s convenient to just let lenders add them to the amount you’re borrowing, it will be better if you pay them upfront. Fees and charges such as valuation fees, mortgage insurance and the like can add up thousands to your mortgage repayment if you don’t pay it upfront.
Ensure that your loan is portable.
If you think there’s a chance that you will move during the course of your loan, make sure to know that your lender will allow you to transfer the loan to a new property. Otherwise, they can charge you a hefty sum for it.
Nothing is constant in this world—except change, death, and taxes. You need to consider this in buying a home and taking up a loan. What if you become seriously ill, or need to take time off to take care of a sick family member? What if you pass away? How will you fulfil your financial obligations and continue mortgage repayments?
Get a life insurance policy to make sure you’re covered in case anything happens. You can get life insurance, children’s cover or TPD and trauma cover to help you cope.
Change your spending habits.
Cut down on less important expenses—if it’s not necessary, think twice before spending on it. Not buying that expensive coffee or a pack of cigs can help you save lots of money you can use to repay your loan. Also, make sure that you’re not overpaying for the things you need. Review and compare internet or electricity and gas providers, or your health insurance to make sure you’re getting your money’s worth.
Sync your repayments with your payday.
If you’re getting paid fortnightly, make it so that your repayment schedule is also fortnightly. Doing so will make sure that you won’t get behind your repayments. Aside from this, it will also save you money and lessen the interest you need to pay.
Deposit lump sum payments.
Got a tax refund or a bonus? Consider putting it in your mortgage. You might want to spend it on other things, but keep in mind that these lump sums can cut down years worth of interest off of your loan.
Take advantage of rate cuts.
If the interest rate decreases, take advantage of it by paying the same amount of loan repayment before the decrease. Doing this can lessen years off of your loan. The RBA can cut down interest rates anytime—make sure to watch out for them.
Create an offset account.
An offset account is a cheque account linked to your loan, where the balance offsets the interest payable on your loan. So the higher the amount you have in this account, the more you can save on interest and lessen the years you’ll have to pay.
For example: if you borrowed $400,000 and you have $50,000 in your offset account, you’ll only need to pay interest on $350,000.
Get a housemate.
Rent out your spare room to have extra income and help you pay off your loan. If you don’t see yourself with a long-term housemate, you can utilise accommodation platforms such as Airbnb to help you find short-term renters. Remember to check with your local council or your apartment super before doing this.
Conduct regular mortgage health checks.
Regularly check if your current loan still fits you the best. If your loan’s interest rate changed or the product can be replaced by a better one, consider refinancing. Whether you choose your current lender or a new one, make sure that it will fit your priorities and circumstances.
📸 Tatjana Plitt
Getting mortgage off your back early isn’t easy but by being smart, diligent, and being financially responsible, you can experience the debt-free lifestyle sooner. If you need more advice, you can always message me on my social media accounts.