CUT YEARS OFF YOUR MORTGAGE!
CONSIDER THESE GENIUS WAYS TO SAVE THOUSANDS
Sick of home repayments taking up a huge chunk of your weekly pay? How many years will this go on for – 15, 20, 30? Well, the good news is that you can cut years off by following some pretty simple rules. Take the time to look into these expert tips – you could save a fortune in the long run.
MAKE FORTNIGHTLY PAYMENTS
When we sign up for a mortgage, many of us think that the easiest option budget-wise might be to choose monthly repayments.
According to Moneysmart (moneysmart.gov.au), you should consider switching to fortnightly repayments. “By paying half the monthly amount every two weeks, you’ll make the equivalent of an extra month’s repayment every year [as each year has 26 fortnights],” they advise.
RETHINK INTEREST-ONLY LOANS
While interest-only loans on investment properties can help your cash flow when rates are high, licenced Australian financial adviser and author Helen Baker (onyourowntwofeet.com.au) says that with rates now so low, it could make more sense to clear more of that mortgage.
“By doing so, you boost your equity which gives you more choices later on – to make other investments, retire earlier or reduce working hours,” says Helen. “And if the property becomes positively geared, you have an extra source of income, too.”
SHOP AROUND
Every year it’s a good idea to look into your current loan and see if you can find a similar product with a lower interest rate.
According to Moneysmart, you should work out what features of your current loan you want to keep, and compare the interest rates on similar loans.
If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative.
“If you decide to switch to another lender, make sure the benefits outweigh any fees you’ll pay for closing your current loan and applying for another,” Moneysmart advises.
MAKE YOUR MORTGAGE WORK HARDER
Mortgages can actually be used in your favour if you know what to do and do it wisely, says Helen. You just need to look at your current circumstances.
“Consider whether to go for a fixed, variable rate or a combination of both on your mortgage, and which makes more sense for your current circumstances,” she
explains. “Fixed will give you budget certainty, but variable offers more flexibility.”
MAKE EXTRA PAYMENTS
Just received a tax refund or maybe a bonus from work? Think about putting that straight into your mortgage. Extra repayments can cut your loan by years, and could save you thousands on interest.
Moneysmart reveals that on a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. “So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan,” they advise. Be sure to ask your lender if there’s a fee for making extra repayments.
COMPARE ONGOING EXPENSES
According to comparison website iselect (iselect.com.au), it pays to make sure all your household services are working hard for you by examining your electricity and gas, internet providers, insurance and phone service. Sit down for a day and see where you can make some changes. That extra money you’re saving can go straight into the mortgage, helping you secure a debt-free lifestyle sooner.
CUT BACK ON THE SMALL STUFF
Here’s an age-old tip that we all seem to forget from time to time. Little lifestyle changes can make a huge difference in the long run. Those two coffees you buy every day can add up to $10 a day – that’s $3650 a year. Get a coffee machine and put any savings into your repayments. The best way to keep the habit is to do something tangible such as setting up an account that automatically moves that $10 into the mortgage every day.
FIND EXTRA INCOME
We’re not talking about taking a second job, but it’s a good idea to work out ways to get extra income.
For example, make your house work for you by renting out the garage for storage, or if you have extra room, consider letting it out to an international student when they are able to travel again. And here’s one that’s as simple as just asking. Schedule in a meeting with your boss, write down all the reasons why and ask for that pay rise!