How to Pay off Your Mortgage Sooner
No one likes to dwell on their mortgage situation. It is quite an intimidating figure, and it is a loan most people spend much of their lives working through – no wonder most of us prefer not to think about it too often! However, occasionally thinking about your mortgage is a wise idea, especially if this includes considering ways you could pay it off faster. If this goal is on your mind right now, read on below for some ideas about how you could get the mortgage monkey off your back earlier than forecast.
This will sound like cheating at first if you have not heard of this strategy before, but it really works. If your mortgage has the option of being repaid fortnightly instead of monthly, make the switch. You will end up paying half the amount of your previous monthly repayment each fortnight. While at first glance this might seem to make no difference, consider that all months (apart from February) are actually slightly longer than four weeks, and you will understand how this tactic will see your annual repayment amount rise slightly after moving to the more frequent schedule.
For example, if you are repaying $3,000 per month, this equates to $36,000 per year (3,000 x 12). However, if you swapped to paying $1,500 per fortnight, your annual repayment amount would increase to $39,000 (1,500 x 26). This difference could help you get that principal reduced faster.
Refinance if Appropriate
The market changes, circumstances change, and interest rates definitely change. It is a great idea to routinely look around at other institutions and their offerings to make sure the deal you have on your mortgage remains competitive as time goes by. If the plan you are on falls behind, you might consider refinancing through another company. However, do not be too quick to jump ship; the fees associated with switching lenders could negate the effects of the better interest rate if you are not careful.
Turn to free resources provided by trusted financial institutions when you need help with determining the best course of action. For example, the home loan calculator on the Heritage Bank website can give you an insight into the interest rates available on today’s market.
Pay More to Pay Less
Throughout the period of your home loan, keep an eye out for opportunities to make extra contributions towards repaying your mortgage. For example, if you find yourself earning more money for a time, consider funnelling your excess income into voluntary repayments if your lender allows for this. Try your best to avoid reducing your repayments too, even if you are given the option to do so. Although mortgage payments may not be the most exciting way to spend your money right now, focusing on these can enable you to get it all paid off sooner, leaving you with more funds in the long term.
Your mortgage does not have to be the scary and foreboding presence in your life that it seems to be. With some clever thinking and persistence, you can take steps to get it cleared sooner.