5 Tips to Help Pay Off Your Mortgage Faster

5 Tips to Help Pay Off Your Mortgage Faster

. 4 min read

A mortgage is a loan that you take out with a bank to buy or move into your house. Mortgages are important because they allow you to make the purchase without paying for it all in one go and provide security if things don't work out. There are many different types of mortgages, such as fixed or variable interest rates, where the repayment is either monthly or fortnightly. By being proactive and taking financial responsibility with your property investment, mortgage holders can save significant money by controlling their mortgage repayments.

In this blog post, we will discuss five tips on how people can tackle their mortgage faster:

  1. Switching to fortnightly payments
  2. Refinancing your mortgage
  3. Considering an offset account
  4. Avoiding an interest-only loan and
  5. Budgeting for an extra payment each year

Ultimately, by taking control of your mortgage through using these tips, you can expect to save a lot of money in the long run.

Switching to Fortnightly Payments

Switching to fortnightly payments reduces the number of transactions that are incurred. It is easier for your bank account because it does not have as many larger withdrawals, making it harder for you to spend more than you have available.

Also, being proactive and paying an extra amount each time helps save significant amounts of money in interest repayments. All you have to do is contact your bank and request a switch to fortnightly payments. To figure out how much you could be saving on your mortgage repayments, check out the Joust monthly repayments calculator.

Therefore, by simply changing your mortgage conditions to fortnightly repayments, you could save years off your mortgage and save yourself a lot of money.

Refinancing Your Mortgage

A mortgage refinance involves taking out a new mortgage to replace the old one. This is done when people want to save money on their monthly repayments or switch from a variable interest rate to a fixed interest rate.

When you refinance, your bank will look at your current financial situation and determine whether you are eligible for a lower interest rate. If so, they will give you a new mortgage with a lower interest rate.

However, it is essential to remember that refinancing comes with costs. There are usually legal and application fees and other charges that need to be considered. People typically refinance their mortgage when they switch from a variable rate to fixed rates or vice versa.

Therefore, if you can save money on your repayments and interest by changing the type of mortgage you have, it is definitely worth considering refinancing as an option.

Considering an Offset Account

An offset account is a savings account that is linked to your mortgage. The money you save in this account reduces the interest you pay on your mortgage.

The purpose of an offset account is to save you money on your mortgage repayments and interest rates and be a backup savings option if something goes wrong with your home loan.

An offset account helps you pay off your mortgage faster because it reduces the amount of interest you pay on your mortgage. For example, if you have a $300,000 mortgage and save $30,000 in your offset account, you only have to pay interest on $270,000.

Therefore by considering opening up an offset account, you could save significant amounts on interest repayments and drastically reduce the time it takes you to pay off your mortgage.

Avoiding an Interest Only Loan

An interest-only loan is where the borrower pays the interest on their loan every month but does not repay any of the original amount borrowed. It is also known as a 'revolving credit' or 'flexi-loan'. The main benefit of an interest-only loan is that it allows people to borrow more money than they would be able to with a regular mortgage.

However, interest-only loans are not as beneficial as they seem. When the time comes to pay off the original amount borrowed, the borrower will have to find a way to repay it all at once. This can be difficult, especially if they have not saved money into an offset account.

Secondly, interest-only loans are more expensive in the long run. The borrower will usually pay a higher interest rate than someone with a regular mortgage.

Therefore, it is important to consider whether an interest-only loan is right for you and your financial situation.

Budgeting for Extra Payments Each Year

Suppose you are motivated to save money and determined to pay off your mortgage faster. In that case, a great way to do this is by setting an additional payment each year that goes directly towards the principal of your home loan. This means if you make one extra repayment per year on top of your regular mortgage repayments, you can save years off the life of your loan.

For example, if you have a 30-year mortgage and make an extra payment each year, you will pay it off in just over 25 years. And if you make two additional payments per year, you will pay it off in just under 20 years.

This method of saving money is an excellent option for those people who are financially savvy and have the motivation to save as much money as possible towards their mortgage repayments.

In conclusion, being proactive with your finances can help you pay off your home loan faster, which will save you thousands in interest payments and fees. By following the five tips listed in this blog post, you can be on your way to mortgage freedom sooner than you think!

Courtney Rehman

Part of the expertEasy editorial team, Courtney is from South Africa.

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