Save tens of thousands on your mortgage
For most people their home is their biggest asset, and paying off that mortgage is probably their largest expense. Here are some tips for getting the most out of your mortgage and saving what can amount to tens of thousands of dollars over the length of your mortgage.
- Always ensure the mortgage on your home is a Principal and Interest mortgage which means you will pay off the loan over a period of time. Use an Interest Only mortgage on your own home in exceptional circumstances and only on a short term basis. Interest Only mortgages are more commonly used on investment properties.
- Having a budget is a key component of paying off your mortgage faster. Knowing what you earn and spend gives you awareness so you can be proactive and make smart decisions about how you spend your money. Everyone ‘wastes’ money on stuff that isn’t important. Are you being smart with how you spend your money?
- Make extra payments on your mortgage; as much as you can afford. Even an extra $20 a week will save you thousands in interest costs and reduce the length of your mortgage. Have a play with the Sorted calculator to see what you could be saving. It’s incredibly motivating when you see how much money those regular extra payments can save you over time.
- Give some thought to the type of mortgage and how you should structure it. Talk to your broker or lender about the benefits of fixed, floating, revolving credit and offset, and how they might suit you. Getting the best mortgage is about more than getting the lowest interest rate.
- Revolving credit or offset mortgage facilities can be incredibly effective for saving you interest and paying down your loan faster. I personally prefer an offset facility for home mortgages as they are much easier to manage. Revolving Credit facilities are where everything gets paid into and out of one account. Offset facilities use a number of bank accounts so you can separate out your various spending areas making it a lot easier for budgeting. Both enable all the funds in the accounts to be offset against the total loan and therefore save you a lot in interest costs.
- Always negotiate. Shop around to get the best deal. This is where using a mortgage broker can make a difference, they are professional negotiators.
- Always keep it in the back of your mind that you want to pay off your mortgage as fast as you can. Most people go into remote control and pay their mortgage off over the standard 25 or 30 year term.
Be proactive. Regularly review your mortgage. Check if you have the best structure and interest rates. Can you increase your payments? Is there anything else you could be doing to pay off your mortgage faster?
By Lisa Dudson