Your mortgage is probably the most significant financial commitment you’ll ever make. You’re not alone either, there are 10.3 million homes in Australia, and of these properties, 6 million have mortgages against them (source: Mozo)
Even though you signed on the dotted line, this substantial amount of debt is a real burden that so many homeowners would love to be free of, sooner rather than later. You might have a 30-year mortgage, but in most cases, you should be able to make adjustments so you can pay it off faster. Paying off your mortgage early can also mean saving money because you aren’t spending as much on interest.
You don’t have to be limited to making your payments once a month. You can make the switch to weekly payments. With this option, you’ll make 52 payments each year instead of 12 and be able to pay off your mortgage quicker. Even if you make your weekly payments quarter the size of monthly payments, the math still ends up being that you pay off your loan faster than you would have otherwise. It’s an easy way to make more frequent payments.
While you could make extra payments in other ways, making the payments on a weekly schedule is helpful for budgeting. Since many people get their pay checks every two weeks, this can also be a practical option that syncs the money you have coming in with what is going out.
Rather than altering your regular repayment schedule, you could also try making a lump sum payment each year. Doing this is an especially great option if you receive a lump sum of cash each year through a work bonus or a tax refund. This single payment can make an enormous difference in your repayment timeline. If you make this habitual each year, you’ll repay even faster.
What’s so great about this option is that you’re paying off your home loan at a faster rate but without necessarily having to cut back in other areas. You’re using “extra” money that you haven’t already accounted for in your regular monthly budget.
If your original loan no longer fits your needs, refinancing is a great option. Not only could refinancing your loan help you get a more desirable interest rate, but it also might decrease the term of your loan so you can be mortgage-free quicker. Keep in mind that refinancing is not always the best option. You should carefully weigh the benefits and the downsides, such as any fees you may have to pay to apply for a new loan or even close out your initial loan.
VSMA knows how complex the refinancing process can be, but we are happy to help! With our extensive network of fully accredited lending professionals, we make it easy to find the perfect lender for your specific requirements. You can book a free consultation with us to get started today!
This one is pretty simple. Just increase your monthly payments slightly. While an extra dollar or two a day may not make a significant impact on your budget, it may be enough to decrease the time it will take to repay your home loan.
Make these higher payments as if your mortgage came with a higher interest rate. Even if you choose to switch to a mortgage with a lower interest rate or your interest rate drops, don’t decrease the amount you’re paying each month. Every little bit counts!
This type of account is linked to your mortgage. Having one of those accounts will reduce the amount of money you need to repay, making it easier to pay off the loan faster—the amount by which your mortgage decreases will depend on the balance you have in your account. As an example, let’s say your mortgage is $450,000, and you have a balance of $25,000 in your offset account. You would only be charged interest on $425,000 instead of $450,000.
Keep in mind that the amount of money you have available in your offset account is very important with this option. If you don’t have much money to set aside for an offset account, it probably won’t be beneficial for paying off your mortgage faster.
One more way that can help you pay off your mortgage sooner rather than later is through better financial planning. VSMA can help by providing professional financial guidance that takes the stress out of this often-overwhelming task. We carefully listen to your financial goals (such as paying off your mortgage early) and look at the big picture of your finances to ensure you’re adequately preparing to meet those goals. This can also be a more pre-emptive measure towards paying off your mortgage quickly if you’re thinking about buying a home but you’re not quite there yet.
If you want to be more educated on your finances and mortgage, get in touch with VSMA today! We’ll help you make better financial decisions now for your mortgage and set you up for success in the future. If we can’t help better your financial situation, we will even give you $1000 cash!
Remember that before you figure out how to pay off your home loan faster, you should carefully check the terms of your loan. For example, if you have a fixed-rate home loan, making extra payments should not be an issue as long as they are less than $20,000. If you’re adding more than that to your payments, it could cost you more money.
If you take the necessary precautions, being free of your mortgage quickly is an incredible feeling! Following these tips will help you get closer to reaching your financial goals.