A mortgage is one of the regular expenses that take the lion’s share of the monthly budget in many Australian households. It’s a necessity and sometimes, it takes a long time before you can fully pay for your home. But the good thing is, there are several ways that you can pay off your mortgage sooner. By making some changes, you’ll finish paying it off more quickly.
In this article, you can learn effective ways to pay off your mortgage fast:
- Make sure that your mortgage repayments are in line with your salary schedule. One way to pay off your mortgage sooner is to align your repayments with your income. In other words, make your repayments every two weeks if your job pays your salary every fortnight. In this way, you can reduce the interest payable and save more money over the duration of your loan.
- Increase the frequency of your mortgage repayments. Instead of making monthly repayments, consider making them twice a month. Not only will you be able to reduce your home loan term, it will also enable you to get significant savings on interest charges. The additional payments will help you reduce your loan balance sooner and can cut your loan term by up to six years. To illustrate: If you make monthly repayments of $2,000, you would have paid $24,000 by the end of the year. But if you make bi-monthly repayments of $1,000, you would end up with $26,000 (26 fortnights). That’s an additional monthly repayment that will enable you to pay off your mortgage sooner than expected.
- Check the interest calculations. The interest on your mortgage is calculated using the outstanding balance. If you increase the frequency of your repayments, you can reduce the amount of interest that you need to pay.
- Evaluate your existing home loan. Over time, it’s better to perform a mortgage check to see if it is still suitable for your requirements. Bear in mind that your mortgage is affected by several factors such as interest rates. It can be that a home loan with a variable interest rate is better than with a fixed rate. If this is the case, you may want to consider re-financing, either with your current lender or a new one.
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