If we were to take a poll, most of us would answer “Yes” to, would we love not to have a
mortgage? Unfortunately, having a mortgage for most of us is part of life. But it doesn’t
have to be all doom and gloom.
The quicker you pay off your home loan the sooner you can be free to use the money to get
more out of life, whatever your goals/ dreams may be. Sounds simply and it can be.
Follow these simple tips and strategies to start making life easier and working for you.
Remember to work smarter not harder.
1) Shop around for the right loan for you- find your true fit:
What do we do when we need that perfect outfit for a special occasion- we shop
around until we find the right fit.
Our home is where we live, so your mortgage should suit you, suit your needs. A low
interest rate is important to your hip pocket however it may not be everything.
Be watchful of “honeymoon” products
Attraction of a low interest rate for 1 or 2 years entices us. After those first initial
years the interest rate can hike up on you and the exit costs may stop you from
leaving. Remind yourself to look at the small print.
At times we are unsure to go for a fixed rate loan or a variable rate loan. Similar,
to when we may bet on a roulette wheel to go black or red, so we decide to place
a bet on each.
Splitting your loan to have a portion variable and a portion fixed can protect
yourself against rate rises and extra interest charges. If rates go down, your
variable portion will too and like wise if rates rise your fixed portion is lower. It’s
a bet each way.
Look for other products/ features to help you save
When you are looking at paying off your home loan faster it is a great idea to
reduce your living costs. Balance the scales.
When looking for the right fit in your home loan look at at features, other
products/ services that can benefit you in achieving the reduction in living costs.
These features, products or services can be discounts off insurances, personal
loans and credit cards. It may be looking at a basic home loan with no frills if you
don’t require them saving you in interest rates.
100% offset accounts/ facilities
Utilise the day to day transaction account that is linked to your home loan. The
balance in your transaction account is considered a reduction on your home loan
which in-turn reduces your interest portion of your repayment and subsequently
will see you pay off more of your principal portion.
Working your way through all the ins and outs of the above and comparing them to
your needs can be dauting and time consuming, use the expertise of a broker’s
knowledge and skill set.
2) Make every little bit count in your favour
We don’t often realise how much the smaller things in life matter. As kids we
enjoyed saving our 5 and 10 cent coins and cracking open that money box/ pig and
seeing our spoils. We can enjoy that same feeling with our home loan by making
small differences. Making small extra payments over time.
As an example, you have a home loan of $450,000 at an interest rate of 3.5%. Your
minimum repayment is $2,020.70 per month, let’s say you round it up to $2,100 per
month Approximately, an extra $80 per month.
You can save 1 year and 11 months off your home loan term and save in interest
That extra $80 a month may come from sacrificing that extra coffee each day or
making your lunch at home and bringing it to work but look at your bigger picture.
3) Try weekly or fortnightly over monthly repayments
We are not simply saying to cut your monthly repayments by 2 or 4. There are 12
months per year, 26 fortnights and 52 weeks. By paying fortnightly or weekly you are
effectively creating more months in the year and paying off your loan quicker.
4) Lump Sum Payments
We can view lump sum payments as free money, money we never really had and we
have already lived without, such as tax refunds or family inheritance.
We don’t really miss these payments if we put them into our home loan upon
receipt but what we could miss is the extra months and thousands of dollars saved if
we don’t pay it. This is what one lump sum payment can do, imagine what could
happen if we made it a yearly occurrence….
5) Take Stock, Health Check and Review
Things change. You may get a promotion or decide to take a sea-change, rates and
the financial market are constantly changing, you may have decided to start a family
or new loan products enter the marketplace. Whatever the reason you should take
stock and work with me. That’s what I am here for.
Not only am I here for when things may change in your life but every year working as
a team I will complete a yearly health check on your finances.
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs
of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to
those matters. Information in this article is correct as of the date of publication and is subject to change.
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