Every Australian family wants to pay off their mortgage sooner. Do they actually do it? The ball and chain of a mortgage is a heavy one to carry around, especially for decades. Some people just accept their mortgage for what it is, make the minimum repayments and wait, wait, wait for the sum to be paid off and wish they could hurry things up. But there are ways of speeding up the process.
If you’re interested in paying off your mortgage sooner rather than later, we present five of the tried and true methods that help you get a real edge over your mortgage.
1. Make repayments according to your pay cycle
One sure fire tip is to make mortgage repayments when you get paid. If you get paid fortnightly, make your mortgage payments according to the same schedule. This cuts down on interest payable – you make 26 individual payments per year instead of just 12. These seem insignificant on paper, but they all add up.
2. Use an offset account
An offset account is a transaction account that reduces the amount you pay in interest on your home loan. If you have a $300,000 loan and $100,000 in savings, your bank or lender only charges interest on the $200,000. The more you save on your offset, the less interest you have to pay. This can shave years off the life of your mortgage.
3. Have your salary paid into your offset
Interest in offset accounts are calculated daily – so having your salary sit untouched in your offset account for a few days a year can actually have a profound effect on your mortgage. This might save you a few extra hundred dollars per year. Every little bit helps!
4. Refinance your mortgage
If you’ve had a home loan for a few years now, you should consider refinancing your mortgage. Refinancing – especially when interest rates are at record lows now (May 2016) – can save you thousands in interest, fees and other charges. In many cases, the home loan product you originally took out may not even exist anymore. The market for your home loan is bigger than ever before. Take advantage of competition and lock in a refinanced mortgage that saves you more in the long run.
5. Use lump sum payments
If you get your tax return or a bonus at work, consider depositing the lump sum into your mortgage. These large payments can shave years off your home loan.
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