Proven strategies for paying that mortgage off faster!

When you take out a mortgage, you’re agreeing to make regular payments over a period of up to 30 years.

During that time, a significant portion of your income will go towards paying off the interest on your loan, which can feel like an endless cycle.

However, it’s important to remember that your home is a valuable asset that can appreciate over time so by paying off your mortgage faster, you can build equity in your home and increase your net worth. Plus, you’ll have the peace of mind that comes with owning your home outright.

How to Pay Your Mortgage off Faster.

Right now you may be faced with higher repayments if you are having to refix your mortgage at a higher interest rate, so most of your extra money will be going towards making up for the higher repayment amount. You may have had to find ways to find more money by cutting back on your expenditure or even getting a flatmate or boarder to help cover the extra cost.

So now that you’ve gone to all this trouble to help you afford the increased repayments, why not keep that going and maintain the higher payment amount once interest rates start to reduce?

If you can, then a larger portion of your repayments will go towards the principal helping you to pay down that mortgage faster.

Then the next time you need to refix at a higher rate, the mortgage will be a lot lower and you hopefully won’t have to make major adjustments to your finances to compensate.

A little forward thinking now, could end up saving you thousands of dollars in interest and shave years off your loan term - in hindsight that’s possibly what borrowers are thinking they should have done when rates were 2.99%!

While paying off your mortgage faster can be a smart financial move, it requires discipline, dedication, and a long-term mindset so here are a few top tips to help you get on track

Fortnightly payments

Instead of making one monthly payment, consider switching to fortnightly payments equal to the monthly amount.

By paying every two weeks instead of every calendar month, you’re effectively making two extra fortnightly mortgage repayments per year.

This can help you pay off your mortgage faster and reduce the amount of interest you pay.

Rounding up your repayments

For example, if you’re paying $1,580 a fortnight, round it up to $1,600. That’s an extra payment of $20 per fortnight (or 3 double shot flat whites) which may not seem like much, but could actually save you thousands of dollars in interest over the life of your loan!

Consider repaying your mortgage as though it’s on a shorter term

If you’re on a 30-year term, calculate your repayments as though it’s only 25 years. With the right structure in place, you can pay your loan off sooner while still having the flexibility to easily lower your repayments in the future if you need to.

Adjusting the loan repayment to reflect a loan term of 20, 25, or 30-years may seem daunting, but by having the right structure in place, regularly reviewing your repayments, and utilising your savings wisely can see you pay your mortgage off years earlier than anticipated and save thousands of dollars in interest costs along the way.

If you, or someone you know, would like to check their borrowing power for a new purchase, check the market out for a great refinance deal, top up for renovations, upgrade the car, or discuss anything to do with finance, insurance, KiwiSaver or international money transfer, let me know. I’m here to help, and as a mortgage adviser my experience, industry knowledge and service comes at no cost to you.