Paying off your mortgage quickly has many advantages, the biggest of which is a lot of extra cash in your pocket! Our working example shows you potentially just how much.
Hopefully these numbers clearly demonstrate what you could save in the long-term. But the real benefit lies in how you can utilise those excess funds. Maybe save for an investment property, or add it to your super nest egg? Perhaps it’s just as simple as enjoying the feeling of being stress-free knowing you no longer need to make those mortgage repayments.
If paying off your loan faster sounds like something you’d like to do, here are a few ways to go about it.
- Reduce your interest rate
Finding a better interest rate can greatly reduce the total amount you pay over the life of your loan.
There are two ways to cut down on the amount of interest you pay. You can either:
- speak to your current lender about reducing your rate, or
- refinance with another lender with a better rate
We recommend exploring option A first. Many lenders are happy to give you a better interest rate to retain your mortgage. Our tip is to ensure you present them with a competitor’s deal that is better. Using this tactic can offer you a genuine saving, without all the hassle of switching.
Choosing option B and refinancing can be a little bit more work, but with the help of a mortgage broker, can be well worth the effort. A good mortgage broker will make sure the costs associated with switching to another lender are quickly recouped by the savings you’ll make with your new interest rate. We’d be happy to help you on that front.
- Make extra repayments to save years and thousands of dollars
Unless you have an interest-only loan, your mortgage repayments pay off both the principal and interest. On an average 25-year mortgage, any extra payments you make during the first five to eight years of your home loan directly cut down your interest, and reduce the life of your mortgage.
There are some limits though. Some fixed rate mortgages come with restrictions on how much extra you’re allowed to repay over the life of the loan. It’s always a good idea to check with your mortgage professional before making extra repayments to see what is and isn’t allowed.
- Adjust your mortgage repayments according to the current interest rate
When interest rates drop – as they currently have – you will see a subsequent reduction in your mortgage repayment rate. While it’s tempting to sit back and enjoy the extra cash flow, we recommend you don’t. Instead, maintain your repayments at the same rate. This way you’ll pay off more of your loan faster, without noticing any extra financial stress.
As you can see, there are quite a few things to consider if you want to pay off your mortgage faster. But doing so could put you on the road to financial freedom that much quicker.
The ideal way to decide if it’s the best solution for your financial needs is to speak with a mortgage broking specialist. At Professional Partners, it’s our job to do the hard yards on behalf of our clients and present you with all the options to help you to develop the right strategy for your financial circumstances. Give us a call to find out more.