If you want your mortgage reduced faster you need to either 1) Make extra repayments or 2) find a way to lower the interest rate on your loan and hence lower your interest payments leaving more space to reduce your mortgage.
Tip 01 - offset loans.
An offset loan lets you put all your cash into one account and the balance is credited against your mortgage. IE if you have an extra $5,000, the amount of interest you will be charged on your home loan will be reduced by that amount. Any extra funds you have should be placed in the account.
Tip 02 - early repayments
Early repayments or putting extra funds into a mortgage will always reduce the amount owing and the interest cost. An extra few dollars per year can make a large difference 10 years down the road.
Tip 03 - maximise deposit
By maximising the deposit you place on a house, you will save on interest costs by reducing the debt. By making sure your deposit is at least 20% of the value of the house you will not have to pay lenders mortgage insurance (LMI), this can save several thousand dollars that could be put towards the mortgage.
Tip 04 - switch from monthly mortgage payments to weekly or fortnightly.
Because interest on your mortgage is calculated on a daily basis, by paying fortnightly or even weekly, you are reducing the interest owing. Adding to this you will also be making an extra 2 payments for the fortnightly option per year or an extra 4 payments for the weekly option per year. This will further reduce the amount of your loan much faster.
This is particularly good option if you get paid weekly or fortnightly as it is easier to budget for your mortgage repayments.
Tip 05 - Yearly mortgage checkup.
You should do a yearly mortgage check up to see of you can save interest costs by refinancing to a better mortgage. We don't suggest you change your loan every year, the normal loan lasts about 4 years before it is refinanced, but you should look at it each year and look to see if you can save cash by refinancing.
Be aware if you do refinance you may have to pay a few thousand dollars to re establish the loan. These costs can include, application fees, legal fees, early payout fees where applicable. Etc.
Summary: Although there is no "magic" ways to reduce your mortgage quickly, with discipline and the careful management of your loan you can pay it off sooner.
Iconex can finance all property.
Iconex is very experienced in all types of property financing. We can advise how the loan can be structured to meet your goals. Call now to for advice for your next home loan.
