Wonderful Ways To Put Your Mortgage In The Rear-View FASTER

08 Feb 2018 - Michael Frigger - 8 minutes

Wonderful Ways To Put Your Mortgage In The Rear-View FASTER

You want the house, not the mortgage. But the only way you were able to get the house was by using a mortgage. So here you are - you've got the house, but you've also got the mortgage.

Let's get rid of the second one as fast as possible.

And to help you do that, I reached to a few of Australia's leading mortgage brokers and experts for their exclusive tips on how they recommend paying off mortgages as fast as possible.

Enjoy.

Note: The following advice has not been tailored to your unique personal circumstances. Please seek professional financial advice before acting on any of them.


Commit to higher repayments with the +2% pa trick

  • Fast track your mortgage by committing to higher than minimum repayments. If your loan is at an interest rate of 4% pa work out what repayments would be at 2% pa more i.e. 6% pa in this case and increase your repayments to this amount.
  • On a $500,000 home loan over 25 years this would save you $86,500 in interest and you would pay off your home almost 7 years ahead of schedule.

Everyday round-up

  • Some everyday spending accounts offer an option to round up your tap and go purchases to the nearest $1 or $5. They then put the difference between that and the purchase price into a separate dedicated savings or investment account. Every few months you could transfer these forced savings directly into your home loan.

Loan split

  • Some people may also find it useful to split their loan into 2 sperate accounts with a focus on repaying one of the splits as fast as possible. One loan could be a low rate inflexible fixed rate and the other a variable rate with an offset that allows unlimited extra repayments.

Don't extend the term when you refinance

  • When you refinance do not re-extend your loan term. If you originally took a 30-year loan many years ago and you are now refinancing to a better interest rate be sure not to make the term 30 years again.
Marty McDonald is the principal of mortgage broker "Mortgage Experts". Marty specialises in helping borrowers with practical loan advice and implementation. Marty is also skilled at helping investors and business owners with complex company and trust structures.

Make more frequent payments

  • No doubt you've heard this before but what you may not know is the benefits depend on how your lender calculates more frequent repayment amounts. Some methods are more beneficial to you than others, and may not be offered by all lenders.
  • If your bank simply calculates fortnightly repayments by dividing the annual repayment by 26 fortnights, it will help to pay part of the principal loan amount off sooner each month and allow you to save on the interest calculated on the loan. However, the rewards will be minimal because you won't be paying any extra off the loan amount when compared to monthly loan repayments.
  • The more beneficial method of calculating fortnightly repayments is when the lender divides the monthly repayment by two and requires you to pay every two weeks. This means you're not only paying more frequently due to the varying number of days in each month but you're also paying 13 months' worth of repayments in the year. After every 12 years this means you've already made an extra year's worth of repayments, meaning you could cut the life of your loan by a number of years!
Belinda Williamson is Canstar’s PR Manager and saving specialist. An accomplished communications professional and finance enthusiast with more than 9 years’ experience educating consumers about money matters, Belinda’s aim is to help more Australians confidently choose the right finance solution for them and ultimately save time and money in the process.
Learn more at Canstar - Home Loans.

Reduce your mortgage faster by:

  • Opting for a principal and interest loan option, so that you are paying off both the loan and the interest with your payments.
  • Increasing your repayments; whenever you find yourself earning more or spending less, try to put that extra money towards your loan.
  • Don't get comfortable, don't get complacent. If your repayment amount decreases due to a change in interest rate, continue to pay the higher amount. You know that your lifestyle can already afford the higher payment, so use it to your advantage.
  • Choosing to set up an offset account and contribute to it as often as you can. Any money you contribute towards this account will offset the interest you are paying and can limit the amount of interest you pay at the same time giving you access to your money if you need it.
  • Changing the frequency of your repayments; pay into your home loan weekly or fortnightly rather than monthly. Interest is calculated daily and charged monthly, therefore if there are fewer days between payments there is less interest charged.
Jack Punch, Director of FP Capital, has been working in the finance industry for almost 3 years. He began with little to no experience in the industry and has since started his own successful mortgage brokerage. Since starting his company in June 2017, he has self-generated leads contributing to a healthy loan book of conforming and non-conforming loans upwards of $75million.
Learn more at FP Capital and on Facebook.

Snowball your repayments

  • This part is the game changer. Instead of trying to pay a little extra off here and there, put everything you can into one debt.
  • This is how it works, you need to sit down and collect all your debt balances, minimum repayments, your current repayments and interest rates.
  • Then you are going to decide to repay the debt with the lowest balance first, so all the other debts need to be set to their minimum repayments, and any extras you were putting in will be added to the repayments for this debt. Once the first debt is eliminated, you take all that money and put it toward your next debt and so on.

Review your credit facilities

  • Often, people are spending way too much on their credit facilities, so look at all your fees and charges as well as your interest rates.
  • Can you do better than what you have now? If you aren't sure you can discuss it with a mortgage broker - we are qualified credit advisors, so we can help you reduce your payment and find the right deal for you.
I’m Orsolya Bartalis a single mum, finance broker, investor and author. I help other mums take control of their finances and create freedom in their lives through property investing. Why am I so passionate about finances? Because I know how important it is to create a passive income that enables time freedom and I understand how challenging it can be to get started. I need you to know that it’s possible!
Learn more at Unlimited Results and on Facebook.

Shop around

  • Based on a $300,000 mortgage, households could be saving up to $4,380 a year on their repayments by negotiating or switching lenders to get the best rate available*. Always get the best deal by comparing lenders. Use an online home loan platform that has all the major banks and other lenders in one place.
  • *Calculation based on rates from 37 Australian banks and non-bank lenders including the Big Four (as at 28 November 2017). The difference between the most expensive interest rate (5.67%) and cheapest interest rate (3.64%) for the average home loan was then aggregated over the life of a 30-year P&I loan.

Compare rates charged for interest only (IO) and principal and interest (P&I) loans

  • Since June 2017, P&I rates have been considerably lower than IO rates across the board. If you can afford to switch to a P&I loan, you’ll be paying less in interest and more towards being debt-free sooner.
David Hyman, managing director and co-founder of home loan platform Lendi. A serial entrepreneur with a unique skillset, David has spent the majority of his career conceptualising, building and scaling startups. In 2013, David was part of a team that founded Lendi to provide Australians with a simpler and more efficient way of getting a home loan.
Learn more at Lendi and on Facebook.

Don't lower your repayments

  • Lower interest rates are always a good thing if you've hundreds of thousands of dollars of debt. But that doesn't mean you have to lower your repayments if interest rates drop.
  • Whatever the length of your mortgage, and regardless of the frequency of your payments, it's good to remember that you don't have to pay the minimum - paying more than required will dissolve your debt faster.

Back your bonus

  • If you're lucky enough to get a yearly bonus or if you receive an unexpected lump sum, resist the temptation to blow it all on a new car, holiday or flash high-definition TV. Stick some of it on your mortgage, instead. In the long term, you'll be thankful you did.

Better budgeting

  • Even if the windfall cash fairy doesn't come visiting, most of us are able to make savings in our daily shopping habits that can be put towards an extra mortgage payment … or two.
  • Gym memberships that are never used, cable and internet TV subscriptions for channels that are rarely viewed, takeaway coffees five days a week - these are all trappings of 21st-century life that can eat into a household budget in small but incremental bites.
  • Cut them out, stash the cash and use it to pay down your mortgage.
Louisa Sanghera has curated a hand-picked team of highly experienced brokers to support her as loan processors, who share her vision to provide exceptional service and look after Zippy clients for life.
Learn more at Zippy Finance and on Facebook.

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Michael Frigger

Michael Frigger

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Michael enjoys long walks along the beach accompanied by a glass of fine wine with a side of vegemite and crackers. Whilst he's not doing that, he's doing his part to help Australians better their personal finances through CashMaster.