When buying a home, to live in or as an investment, most people will have the goal of eventually paying it off.
A 30-year loan might seem like a long time to be making repayments, but you won’t be stuck paying interest if you’re able to pay it off sooner.
Here are five ways to help achieve that that.
The easiest way to reduce your mortgage is to pay it more often. If you’re making fortnightly repayments instead of monthly, you will be making more repayments over the course of a year and therefore are paying it off sooner.
There are 26 fortnights in a year, but only 12 months.
That might not seem like all that much, but it could save you five years on your mortgage thanks to the power of compounding.
One of the best things to spend your money on is reducing debt. If you get a regular bonus from your work, consider putting at least a portion of it into your mortgage.
If you do this every single year, you’ll be reducing the principal component a lot faster and therefore pay less interest. Over time, it will shed years off your mortgage.
Don’t Max Out Your Borrowing
Just because you can borrow your maximum amount, doesn’t mean you should.
If you want to pay off your home faster, you could simply look at buying a home for less than what you are able to service. That way, you can put the additional funds into paying down the loan which will help you pay off the mortgage a lot faster.
Another way to reduce your mortgage repayments is to refinance to a new home loan product with a lower interest rate.
That way you can make the same level of repayments but put more towards the principal component. You’ll then be paying off the loan faster.
At the same time, you can also look at refinancing and rolling over some higher interest debts, such as car and personal loans, into your home loans. You can then take those savings and put them into your home loan.
Use an Offset Account
If you’re able to budget well, it’s possible to incorporate the use of an offset account into your mortgage planning.
By putting your monthly expenses on credit card and letting those funds sit in your offset account, you’ll in effect have more money to put towards your home loan by saving on interest. Just be sure to pay off the credit.
To learn how you can pay off your mortgage sooner contact a Sana Finance mortgage specialist to get assistance today.