Five Ways To Pay Your Mortgage Off Faster
So you want to pay your mortgage off faster – don’t we all…
For most Kiwis the mortgage will be the largest financial commitment that they will ever have.
Unfortunately most people do not make much of an effort to understand how the loans should be set up, or how they should be managed to allow you to pay your mortgage off faster.
People tend to just accepted the mortgage the way the bank have approved it.
Here Are Five Ways To Pay Your Mortgage Off Faster
- Review the loans and the interest rates offered – review your loans with a broker as often your mortgage broker will be able to get better home loan interest rates.
- Split your mortgage into separate loans – too often the banks will provide your total mortgage in just one loan. This gives you very little flexibility as any changes that you want to make affect the whole of your mortgage lending. If you want to break a loan then you have to break the whole mortgage which can be expensive.
- Use a revolving credit account – this allows you to apply money to your mortgage as soon as you receive it (on your payday) so you are saving the maximum interest. Revolving credit accounts calculate the interest daily so even having the money in your account for an extra day will save you money.
- Increase your repayments – the banks will generally set your repayments at the minimum and therefore it will take the full term of the mortgage to get paid. Most of what you pay (your repayment) will be interest with a small amount being paid off the principal. If you want to pay off your mortgage faster then the best way is to increase your regular repayments as ever extra dollar goes to paying off more of the principal amount.
- Pay lump-sums – as mortgage brokers we encourage people to pay a lump-sum every time that they refix their loans. Even a small lump-sum helps to reduce the principal owing and can shave years off the term of your mortgage.
Small Changes Make The Difference
Don’t try to bit off more than you can chew.
Desmond Tutu once wisely said that “there is only one way to eat an elephant: a bite at a time.”
What he meant by this is that there are things in life that seem quite daunting and even impossible, but they can be accomplished gradually by taking on just a little at a time.
This is a common experience, and it’s the reason so many people fall short of turning their dreams into reality.
They try to eat the whole elephant in a single bite.
Mortgages are no different.
A mortgage is generally a huge debt and unlike most loans, a mortgage is generally structured to be paid off over the next 25-years or 30-years.
That’s a long time and it is hard to imagine the day it finally gets paid off.
Some planning and a mortgage reduction programme can help, and for this I have created a simple low cost option that is called “eat my mortgage.”
Mortgage Brokers Keep You Focused
Splitting your mortgage into a few smaller loans is one way to get focused.
You will see the difference as a smaller loan reduces and this keeps you focused.
Having a mortgage broker review your mortgage with you is another way to keep focused, and it also gives you the opportunity to ask questions and fine-tune things.
A good mortgage broker will help you keep on track and that is one good reason to use a mortgage broker.