C&G's Guide to Paying Off Your Mortgage Faster
To many, home ownership represents freedom, security and financial stability. However, with the home loan term in Australia averaging 25-30 years, it can sometimes feel impossible to reach our goals. You can always aim to pay off your mortgage sooner! Don’t let the seemingly never-ending 30 year term of your loan discourage you. Paying off your mortgage early will save you money and take a financial load off your shoulders. In this C&G Blog, we offer some easy tips to help you pay off your mortgage faster.
Swap to an offset account
An offset account is a savings or transaction account linked to your mortgage that reduces the amount you owe on your mortgage by reducing the amount of interest you pay, helping you pay off your mortgage faster.
Pay above the minimum amount
Simply increasing your repayment amount by two thirds can significantly reduce your loan repayment time frame. For example, if your mortgage is $500,000 and you pay back at a rate of 3% totaling $2,100 per month, it would take over 30 years to pay off. Increasing this amount by two thirds to $3,500 per month would cut this time in half (depending on interest rates).
Switch to fortnightly repayments
By paying half the monthly amount every two weeks you'll make the equivalent of an extra month's repayment each year (as each year has 26 fortnights).
Make extra payments where possible
Speak to your account about where there are possibilities in your income to make extra payments. Making extra repayments can shave years off your loan, and also save you thousands in interest. With tax-time coming up, you should seriously consider putting your tax return towards your mortgage! Make sure to double check with your bank or lender if there is a fee before making any additional repayments on your loan.
Tighten your budget
Have a look at your monthly spending and identify areas where you can pull back. Reducing what we spend on entertainment, dining, and even your morning coffee can make a huge difference. Making small changes like packing your lunch for work or cancelling one streaming subscription service can save you hundreds of dollars a year, which you can then put towards your mortgage!
Downsize your home
Sometimes the best way to pay a mortgage fast is to sell the property. After selling your home, you are then free to find a property in a lower price bracket and put the price difference towards settling your mortgage. Be sure to get in touch with the C&G team if you are considering this option so that we can help you decide if it’s right for you.