It’s every home owner’s dream to pay off their mortgage. By taking some time out of your day and doing the research, you could potentially save money and time repaying your loan. Here are five ways you can get started today:
1. Fortnightly repayments
If possible, increase the mortgage repayment frequency from monthly to weekly or fortnightly. This will effectively produce a few extra repayments to your mortgage each year. There are 26 fortnights a year compared to 12 months. It’s basically a trick to make another month’s worth of mortgage repayments a year. Also, the interest on a mortgage is calculated daily so making more frequent repayments reduces the interest paid on the loan. This tip can save years off a 30-year loan.
2. Increase your home loan repayments
Increasing the mortgage repayment amount, even by a small amount, will take years of the mortgage. Coupled with more frequent repayments and the mortgage term will reduce further.
3. Maintain higher repayments
If the required mortgage repayment reduces due to interest rate drops, then continue with the same mortgage repayment amounts. More of the repayment will pay down the principle and repay the mortgage faster.
4. Set up an offset bank account
An Offset Bank Account is an account that is linked to a loan. Instead of earning interest, as most accounts do, it rather saves interest paid on the loan. As the name suggests the account balance offsets the loan balance and reduce the balance which the interest is calculated. For example, if a mortgage balance is $200,000 and the offset account is $20,000, then the interest is calculated on $180,000. An offset account is like a tax-free investment which outperforms any savings account.
5. Review and negotiate
Legislation, the economy and lender’s offers change frequently. Over the life of your loan your personal situation changes. Make sure you regularly review your loan. It may be possible to negotiate a better deal on rates, fees etc.
If you require support with debt reduction, please contact your trusted team of local financial planners at Newcastle Financial Planning Group on 02 4032 7934 to receive support and identify a suitable strategy to guide you in the right direction.
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