8 Tips to Pay Off Your Mortgage Quickly
Wednesday Oct 14th, 2020
Of course, everyone wishes to have a debt-free lifestyle where they don't have to worry about paying loans every month. And we own our homes outright, and our bank accounts are filled with saved cash. This dream can turn into a reality, only if we make smart mortgage payments. To help you do so, here are the best tips for paying off your loan faster.
Big Banks Are Not the Only Option
It's not just about the big banks – smaller lenders are often backed by bigger banks, and are expected to fight for your money.
Here are some options that big banks don't offer, but small lenders do;
- Higher Lending Ratios (LVR) – you can have less of a deposit
- Longer loan terms – for instance – 30 years as opposed to 30 years
- Reduced application and ongoing fees
- Easier procedure
- Fixed-rate with a 100$ offset account
Make Your Home Loan Works for You
Look at more than interest rate when it comes to choosing a home loan that fits your needs and works with your lifestyle and objectives. A home loan that provides an offset account, for example, may come with a higher interest rate than a comparable product, which may potentially save you more money over time.
Consider an Offset Account
An offset account is a transactional savings account that is linked with your home loan. Once interest on your home loan is determined, the offset account balance is deducted from the principal sum due. This will high the amount of interest paid to you and help you pay off your principal and interest house loan more quickly.
For instance, say you've got a $450,000 home loan with a five per cent interest rate. When you had $50,000 in your offset account, just $400,000 of your home loan will be spent on interest. That means you will pay $20,000 in interest per year instead of $22,500, saving you $2500 a year.
Make Payments More Frequently
Some lenders allow you to move from monthly to fortnightly repayments. Since interest on home loans is measured regularly, making payments more frequently help to lower the interest. You pay throughout your loan to become debt-free faster.
Consider Refinancing Your Home Loan
You may want to consider refinancing your home loan if you have checked your home loan and found it not suiting your needs. Renegotiating the current rate with your existing lender or switching to a new lender offering a lower interest rate will lead to savings and help to reduce the term of your principal and interest loan.
Pay off the Principal
Depending on your circumstances, only loans may want to be kept free of interest. Choosing to pay only the interest on your mortgage for a given time would mean that if the interest rate expires, you will need to pay off the full principal amount at a higher propensity.
Keep An Annual Home Loan Health Check
Never set up your home loan, and forget it. Lenders must compete for your business in a competitive market, so take some time each year to do a health check on your home loan and see what deals are out there.
Put Your Home Loan Above Everything Else
When it comes to paying mortgage faster, avoiding less important expenses is necessary. For instance, do you really need that branded canned tomatoes? Or you don't have to buy a new dress just because you want to, right? Cut down extra expenses, and you will see the difference.
Also, be sure that your household services are working their hardest for you by comparing your gas and electricity, or even looking into health insurance.
There's no point in paying for stuff you don't need or overpaying for things, so figure out where to make a few cuts. You could use the extra cash to make more home loan payments and help secure a debt-free lifestyle much sooner.
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