Because your mortgage is likely to be the largest debt you will ever have, it's logical that you want to pay it off as soon as possible. We've compiled a list of helpful advice and tips to assist you in paying off your mortgage as quickly as possible!
Property for sale as an investment.
Buying an investment property may seem counterintuitive because it would raise your debts, but there is a distinction between good and bad debt. Debts that are beneficial to you, such as a positively geared investment property, can actually help you pay off your mortgage faster!
What is the mechanism behind this?
Good debt is one that is secured by an item that increases in value and allows you to earn money (such as rental income from an investment property).
A bad debt, on the other hand, is described as debt on an asset that depreciates in value over time, such as a car loan. A positively geared property is one that generates more rental income than it costs you to keep the home due to mortgage obligations. So, when you've paid off your mortgage, you'll have some money left over. This implies that any extra money you make from your positively geared investment property can be used to service your home's mortgage debt, allowing you to pay it off faster.
Accounts that are offset
Stop reading right now and call your lender if you don't already have one.
Mortgages that are 100 percent offset loans allow you to use your mortgage as your primary source of funds. If you have an offset account against your mortgage, whatever money you have in that account will be applied to your principal, resulting in you paying less interest on your loan. This offset account serves as your day-to-day cash account, as you can still withdraw funds to cover day-to-day costs, but whatever balance you have in it is working for you to reduce your interest payments.
If you pay your salary into the offset account, as well as any income from investment properties, you'll be able to pay down your mortgage faster because you'll be paying down the principal from the beginning. It's not uncommon for committed savers to cut their mortgage by a couple of years by keeping cash in their bank account. Lenders will offer you an alluring introductory low-interest rate, but after the initial time, you will be converted to a higher variable interest rate, and you will most likely wind up paying more in the long run.
Increase the frequency of your repayments.
This is one of the most basic methods that many people are unaware of, yet it can significantly reduce the term and cost of your house loan. If you presently make monthly payments on your house loan, switching to fortnightly payments can actually lower your interest payments, allowing you to pay down your principal faster.
Instead of paying your mortgage at the end of each month, paying fortnightly will save you half a month in interest. You'll also have paid an extra month off your mortgage by the end of the year. The mechanism behind this is because a year is divided into 26 fortnights but only 12 months. So, if you pay every two weeks, you'll be paying for 13 months in a year. This can make a significant impact in terms of paying off your mortgage sooner.
Refinance by comparing lenders and informing your existing lender.
Many people simply ‘sit and forget about their present mortgage and make the required installments. You'd be surprised at how many folks have no idea what interest rate they're paying or what the current comparable rate is and this is on their most important debt. You can easily call your lender to renegotiate your loan if your present loan does not meet your needs or you believe your interest rate is too high. Comparing lenders to find the best offer is far easier than it appears, and you can even hire a mortgage broker to handle the legwork for you.
Also Read: 5 Ways To Boost Your Financial Health