Each time a payment comes out for your mortgage repayments, it feels like it is a never ending flow of money from your account and if you're near the start of your mortgage, 30 years seems like a long time.
Trying to pay your mortgage off faster has large benefits to the total amount you will end up paying and the equity you will have available in your property should you want to buy another property or make other investments.
We have 5 tips to helping pay your mortgage off faster.
If your interest rate drops, keep your payments the same
With the interest rates down and some of the lowest in history current, you may be coming off higher rates (if only slightly). When you do come off your higher rates, this is a great opportunity to keep your repayments the same and be paying off more principle. You'll notice no difference in your budget as nothing has changed, but you can make big inroads into your loan repayment time.
For example, you are currently paying the minimum amount on your loan at 4.5% interest and you can get new rates of 3.59%. Keeping your payments the same could take 5 years of the life of your mortgage on a 30 year term. That's 5 years of not needing to pay a mortgage. Imagine what you can do in that time!Got a payrise? Bump up your payments
As we go through our working lives, we generally all get pay rises. It can be really tempting to use these pay rises to improve our standard of living and thats ok but bumping up your mortgage repayments every time you get a pay rise means you can shave years off your mortgage repayment time. Your budget doesn't really change but your mortgage repayments do, paying off more principle with every payment.
Increasing your payments by as little as $25/week on $100,000 can take 9 years off your mortgage at current rates.Got some extra cash? Pay a lump sum
Perhaps you get a bonus at work, an inheritance or you've saved hard. Using these lump sums to pay off some of your mortgage can make a big difference to your loan repayment timeframe. Most lenders allow you to make some form of extra payment on your loan, even if you are on a fixed interest rate or you are able to pay lump sums as you come off a fixed rate and before you get My Mortgage to negotiate your new rate for you.
Lump sums, when paid off are pure principle payments so it all works towards getting your mortgage cleared quicker.Paying high interest on a Car Loan, Credit Card or HP? - Consolidate
We all know that things like car loans, HP's and credit cards can have sky high interest rates on unpaid balances and so if you are repaying things like this, consolidating these into your home loan where possible can save you a lot of money. Once you have this debt on a much lower interest rate (at times 15% lower) you are able to put that extra money you would have paid in interest on those higher interest loans, into your home loan and get it all paid off much quicker.
The key thing here is to actually get the consolidated loans paid off faster meaning you can put more money into paying off your mortgage, not just clearing the debt from other lenders.Make a budget - You might be able to pay more
So, whether it is keeping your payments the same when you get better interest rates, increasing your payments when you earn more, paying off lump sums from your principle, paying off higher interest debt, or keeping an eye on your budget to find those extra dollars to add to your repayments, there are a lot of ways to do things that will help you save you thousands of dollars in interest and pay off your mortgage faster.
If you'd like to discuss doing any of this with your current mortgage, feel free to contact the My Mortgage team and we'll happily talk through the options and work with you to pay your home loan off quicker.