Paying off your mortgage faster than the bank “prescribes” is one of the best bits of financial advice I can offer you. There are lots of different things that you can do, which I explain in my upcoming book, “Mindful Money”. As a special sneak peek, I am sharing with you some extracts from this book. These are just some of the many tips, hacks and strategies that I recommend and personally use to smash my own mortgage, so I can promise you that they make a difference and really help. You can use all of these, or just pick the ones you like and will work for you. And if you have an honest go at tackling your mortgage, you will be blown away but how much time, energy and money you can save.
Keep an eye on what interest rates are around, and consider whether going for a lower option will be worthwhile once any upfront or loan establishment fees are taken into account. Only refinance if the new provider agrees to make your new term the same as where you’re up to now, or less. Set your mortgage repayments the same as what you were previously paying, or even higher if possible. Otherwise you’ll be likely to spend that money elsewhere and take even longer to pay off your home.
Pay your mortgage more often Mindset
Most loans default to monthly repayments, because you’ll pay less off your home loan, allowing the bank to charge you more interest. Because interest is calculated daily, if you can pay your mortgage repayments weekly or fortnightly, the less your balance will be and the less interest you will pay. So these more frequent repayments will have a greater impact in reducing your principal.
Say goodbye to the Rolls-Royce mortgage
Often the loans that come with all the bells and whistles, such as credit cards, offset facilities, overdrafts and special ‘private banking’ hotline services attract more expensive interest rates, no matter how well they try to package them up. The simplest no-frills loans are the most effective, as they’re easy to understand, involve less temptation as they don’t come with ridiculous products and services, and almost always have a lower interest rate.
Give your mortgage a pay rise
Every time you get a raise, increase your automatic repayment (just watch the term reduce!) by the new after-tax difference. You won’t miss the money as you never got to experience it in the first place. And if you get regular pay rises, even if only in line with inflation, this practice can really make a big difference over the long run.
Consider digital lenders
With new non-bank lenders appearing, such as Athena, there are often better mortgage options available if you look beyond the banks, as these providers don’t have the same expenses as a bank, so they can pass far better and lower interest rates on to you. Plus they genuinely want you to pay off your home loan as fast as possible. They are straight up with their rates (which are super low) and there are $0 fees…yup, that is right…$0 fees. So not just saving on your rate, but fees as well. Allowing you to pay even more off your home loan and faster!
Also, with Athena, if they lower their interest rates, their existing customers will get it too, not just new people signing up, which is a common trick used by the banks with their ‘honeymoon’ rates for only new customers. Why should the banks only “reward” the new customers?
Pay your mortgage the moment you get paid
By prioritising your mortgage repayment, you can feel the pressure lifting knowing that you’ve honoured your biggest expense first. This is less of a money-saving tactic than a psychological one, knowing you’ve just paid a big bill.
Do The $1000 Project
So many people around the world have used The $1000 Project to not only save the deposit for their home loan but also to help pay it off. This can be a great way to get your home loan term down by 30% or more, so that you can move on to investing in building your number sooner. And you can use The $1000 Project to set mini goals for tackling your mortgage at any time.
If you’ve exhausted all other options, try simply rounding up your mortgage repayment to the nearest $10, $100 or $1000. Say your mortgage repayment is $1875 per month – change the automatic direct debit to either $1880, $1900 or even $2000 p.m. That way, you’re spreading the increase over the month, and you’ll likely find that you don’t notice the $5, $30 or $130 per month less as it’s come out of your bank account before you’ve had the opportunity or temptation to spend it.
To have a play around with different options and see how extra repayments and lump sum repayments can save you tens of thousands of dollars in interest plus a huge amount of time, head to the Athena website and see what you can do to your mortgage. These are the honest, straight up guys who want you to pay off your mortgage and will help you along the way.
Canna Campbell is the founder and director of SASS Financial Services, a boutique financial planning firm. She is Channel 9’s exclusive ‘money expert’, founder of financial media platform SugarMamma.TV and best selling author of The $1000 Project and Mindful Money.