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Do you really want to wait for 30 years to own your dream home?
Buying a home is not the same as owning it! Unless you pay off the last cent on your mortgage, your house is pledged as security to your lender – in short, it does not really belong to you.

 
Pay Off Your Mortgage Faster
 

Fortunately, with financial discipline and simple hacks, you could beat your mortgage by paying it off quickly, without feeling the pinch in your pocket.

If you are wondering how to pay off your mortgage faster, these six steps will help you achieve your goal efficiently.


Step 1 – Pay your first instalment before it falls due

One of the easiest ways to get ahead of your mortgage is by making your repayment before it falls due. In most cases, the first repayment becomes due only after a month of settlement. However, if you can save enough cash, and your lender allows, start by making your first repayment on the day of settlement itself.


Step 2 – Attack the principle early

The first few years of your mortgage could be quite frustrating – as you might feel you are only paying interest on your home loan because your principle reduces marginally at the beginning of your home loan. However, you could turn this around to your advantage by paying a little extra each month, attacking the principle amount head on.

Any amount that you pay above your minimum repayment amount gets applied to the capital, bringing down the total interest payable on the mortgage as well. Paying as little as $25 extra each month, from the beginning of the term, could lead to significant savings. You can use this extra repayment calculator to see the difference for yourself.


Step 3 – Pay more frequently

You don’t need to do any complicated calculations to be debt free sooner. By merely making fortnightly repayments instead of monthly, you can wipe off several years from your home loan. Why? Because there are 26 fortnights in a year and only 12 months. Thus, by paying fortnightly, you effectively end up making an extra repayment each year without feeling any financial strain on your pocket.


Step 4 – Apply any windfall gains or savings towards your mortgage

Whether it is your tax refund or annual bonus, by applying it towards your mortgage, you can score significant savings and get rid of your mortgage sooner. Use this online calculator to see the effect of lump sum payments on your mortgage.

According to experts, there are many simple ways to pay off your mortgage quickly. By forgoing small luxuries, such as the daily pack of cigarettes or a glass of Scotch, you not only improve your health but make considerable savings that can be used to pay off your mortgage rapidly. Just by swapping your take-out lunch with a home cooked meal, you can save up to $10 per day, which is over $200 per month, or $2,400 in a year.


Step 5 – Stay informed

A recent study found over two-thirds of Australians don’t know the rate they are paying on their mortgage, which means they could be losing thousands of dollars while savvy homebuyers pick up low-interest rate deals in the market to finance their homes.

Over the years, it is easy to get complacent with your home loan. As the months roll on, you get into the habit of making your repayments as they fall due, without bothering about what’s happening in the market.

Unfortunately, this laidback attitude can cost you some serious money. Remember, knowledge is power. So, to stay ahead of your mortgage, you must stay informed of the happenings in the market, the new financial products on offer and the ongoing mortgage rates.

Did you know you can save over $32,000 on a $300,000 home loan (30-year term at 5% pa) by switching to a rate that is less by half a percent? At present, it is possible to find home loans starting as low as 3.79 percent. Compare home loan deals here.


Step 6 – Refinance

If you have a 30-year mortgage, by refinancing to a shorter term, say 20 years, you will find yourself zipping through your mortgage much faster. Besides, you are more likely to find a lower rate, as shorter terms come hand in hand with lower interest rates. Thus, not only you attain financial freedom faster but also pay a lot lesser in interest. Use a mortgage repayment calculator to work out your monthly repayments on a short-term loan. By changing the number of years in the calculator, you can figure out the sweet spot at which you can afford the repayments.

However, before you refinance, you must consider the costs of setting up a new loan and exiting your existing loan. It is prudent to determine your breakeven point before you decide to refinance your home loan.


Making the right start

Thanks to the increasing competition in the market, it is possible to find competitive home loan deals from several smaller banks and non-bank lenders. Besides, you can opt for helpful features, such as an offset account, that could save you a lot of money in the long run. It is, therefore, advisable to get in touch with a mortgage broker who can evaluate your situation and introduce you to the cheapest and best-fit loans for your situation.

According to experts, the best way to get rid of your mortgage fast is by choosing the right home loan in the first place. Before you go mortgage hunting, it is advisable to note down the features you need in your home loan and convey the same to your broker. As each individual is different, no two home loans are the same – for example, an interest-only loan may be suitable for an investor looking for financial flexibility, but it is not a great option for a regular owner-occupier. Besides, by knowing what you don’t need in your home loan, you can ditch those features at the outset and avoid paying any fees for them.

Remember, cheapest isn’t always the best. It pays to shop around for a home loan that provides you what you want. With HashChing, you can compare hundreds of home loan products from over 60 lenders across Australia to find competitive deals in line with your requirements. Browse home loan deals here.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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