Every homeowner has one goal; to finish up paying for their mortgage. According to recent statistics, around 85 to 90% of home buyers opt for a mortgage of 30 years. This can be a long time to repay a debt and its interest. The good news is that there are some measures that you can use to pay your mortgage faster.
Make extra repayments
If you can use ad-hoc and consistent repayments of things such as tax returns and bonuses to minimize your principal, it will be possible to repay the mortgage faster. The earlier you start to make repayments in the loan term, the more the benefits you will reap in terms of money and time saved. The mortgage repayment will mostly fall due one month after it has been settled. When you make the first repayment on the date of settlement, this will minimize the principle before the first interest lot starts to accrue on the borrowed amount. It is also advisable to pay the charges and loan fee upfront. You will need to ensure that things such as legal fees, establishment fees, and the Lender Mortgage insurance (where this is applicable) have been paid up front. This can help you to save thousands of dollars that would have been charged as interest over the term of the loan.
Find another source of income
It would be a good idea to find a full-time or part-time job that you can do on the weekends and nights to help accelerate your mortgage payment. You can also get a side hustle that you can use to earn more during your free time. If you can manage to get a substantial amount from another job, you can use this to reduce your mortgage repayment. This will definitely have an impact on your mortgage balance. The moment you start making regular an additional repayment on your mortgage from the start of the loan term, this will have a bigger impact on the overall cost and time of the loan as compared to starting from the 5 or 10 years into your loan. Even where you find that you have 5 years in the loan term, it is still possible to make some good savings once you begin to make some additional payments.
Repay more often
In case the amount of your loan repayment is calculated on a monthly basis, you can choose to make additional savings if you can make the repayments on a fortnight basis. This way, you will end up making an additional repayment that will be equal to a one-month repayment. This will reduce the principal faster. Ensure that you also look into the fine prints of the loan documents. When you do that, you should also ensure that the lender will not calculate the bi-monthly repayment as half the monthly repayment as this will not help you save you money. Instead, the lender should reduce the interest payable on the loan if you are to make two monthly repayments.
Negotiate to save on your mortgage
The current credit situation worldwide may make this difficult. However, it is still possible to make some meaningful savings as long as you negotiate with the lender on the fees and the interest rates. The local mortgage adviser can help you to focus on the areas where you are likely to make a saving. Generally, the establishment fees and interest rates are some nice places where you can begin your negotiations. Good credit history and good work history and good savings can help you here.
Minimize your expenditure
You will need to reduce your expenditure on things that don’t add value to your life such as drinking alcohol, smoking or even eating dinner in fast food restaurants. If you skip buying one lunch or one dinner a week, this could help you save an extra $50 that would go into your mortgage repayment. You can even opt to downsize to a smaller home. While this may not be a simple or even a fun option, downsizing is often worth the freedom that comes with being debt-free.
Work with smaller banks that have lower interest rates
A good way of paying your mortgage faster is to find a lower rate of interest than the one you currently have while maintaining the same amount you pay each month. Find a mortgage loan with a lower interest rate and is flexible enough to allow you make some extra repayment. You will find different lenders with rates that differ significantly from the rates of the major banks while still offering some good flexibility. However, if you opt to refinance, you will need to ensure that the cost of doing that will outweigh the benefits.
Choose a loan that has features without any charge. There are loans that charge a fee for extra repayment or even for every redraw. Others will even charge to report the loan to another property or even take another repayment holiday. If you are aware of what you may need to use or choose a loan that will not charge you, it will be possible for you to save.
Unlike what many people think, the big banks are not the best places to borrow money for your mortgage. There are many specialist lenders and small banks that have some very competitive loans. The fact that you haven’t heard of a particular lender doesn’t mean that the lender is not a reputable one. The mortgage adviser will guide you on the most credible lenders and the ones that are the most suitable for your individual situation.
Maintain the same repayment even with lower interest rates
You might be tempted to minimize your repayment when the interest rate goes down and put the difference in other expenses. You do not need to do that and a good idea would be to keep the repayments at the old levels. This will ensure that you have a significant amount of principal reduced off from your loan especially if there is a decrease in the interest rate. Check out how much mortgage you can afford.