Owning your own home is a long-held Australian dream, although our house price to income ratio can sometimes make that dream seem daunting. A mortgage is a big commitment no matter which angle you look at it, but there are ways to dwindle that mortgage down and start building real wealth. You can save thousands off your home loan by following the right advice. Here are Goodlife Homes’ top 10 tips to help pay off your home loan faster.
1. Increase your mortgage payments
It may be obvious, but it’s easier to pay off your mortgage when you are earning more money.
Owning your own home is a long-held Australian dream, although our house price to income ratio can sometimes make that dream seem daunting. A mortgage is a big commitment no matter which angle you look at it, but there are ways to dwindle that mortgage down and start building real wealth. You can save thousands off your home loan by following the right advice. Here are Goodlife Homes’ top 10 tips to help pay off your home loan faster.
1. Increase your mortgage payments
It may be obvious, but it’s easier to pay off your mortgage when you are earning more money. Dual and higher income households are better placed to increase their mortgage payments, but taking on a second job or renting out a spare room are both excellent ways to find that extra money for mortgage repayments.
2. Budget
There’s no point in earning that extra money if you’re not watching how you spend it! Draw up a reasonable budget and stick to it, putting any leftover money back into your mortgage. Consider how you may save extra money throughout the month by switching energy providers, buying second hand, or cutting back on luxuries. Topping up your loan with these small monthly savings can shave years off a mortgage.
3. Shop around
The mortgage market is very competitive, and most mortgage owners can find a better deal by simply shopping around for a lower interest rate and better terms and discounts. Throughout the course of your loan, compare the terms and fees of your own mortgage against other available products. Consider the terms over the life of the loan when comparing honeymoon rates, and watch out for early repayment penalties.
4. Pay more when interest rates are low
Many people make the mistake of paying less during periods of low interest rates, but extra payments go a long way towards chipping away at your principal. Take advantage of low interest rates by maintaining or increasing your regular repayments. These extra repayments will go towards paying off your principal rather than your interest, so they can strip years off your loan. Low rates aren’t going to last forever, and the faster you pay off your mortgage, the better.
5. Pay extra in lump sums
Put Christmas bonuses, gifts, and inheritances into an offset account or directly into the principal. Putting money on the principal reduces the temptation of withdrawing from it later, but an offset account has tax benefits for investors.
6. Get an offset account
Replace your savings account with a 100% offset account for daily transactions, so that any extra money you have helps reduce the interest charged on your daily balance. The more you have in your offset account, the less interest you’ll have to pay. Have your salary paid into your offset account, and keep your savings there too.
7. Consolidate your debts
You can’t start building wealth until you pay off your other debts. Consolidate debts into one low interest loan, and avoid taking on new loans. Pay utility and credit card bills on time to avoid paying interest and late payment penalties.
8. Leverage
Use benefits from other investments, such as shares and property investments, to make extra payments.
9. Pay more often
Adjusting your mortgage payments to fortnightly rather than monthly payments is one of the easiest ways to save on your mortgage. A fortnightly schedule means an extra payment every year, which you’ll hardly notice but can end up cutting years off a 30 year loan.
10. Educate yourself
Team up with financial planners, mortgage lenders and brokers, and investment real estate specialists in Perth to help you find the right strategy for your individual situation. Why not get in touch with Goodlife Homes financial experts and see how we can help you today?
