Are you dreaming of a mortgage-free future, but not sure where to start or what you should do to get there? Being mortgage-free may seem like a distant dream, but paying off your mortgage early is not only achievable, it’s also a smart financial move that could save you thousands of dollars in interest. Read on as we explore five practical strategies to help you accelerate your mortgage repayment journey and achieve your mortgage-free dreams.
1. Increase your repayment amounts
By increasing the amount you pay towards your regular mortgage repayments, you help reduce the principal balance faster and shorten the term of your loan. Even a small increase in your repayment amount can make a significant difference over the life of your mortgage. Review your household budget and identify any expenses you may be able to cut back on and redirect this amount to your mortgage repayments.
2. Structure your mortgage with flexibility in mind
How your home loan is structured can significantly impact both your mortgage repayments and the time it takes to fully repay your home loan. Instead of fixing your entire mortgage for the same period, consider restructuring your home loan with a portion split out across various fixed-rate periods and a portion on a variable interest rate. Restructuring in this way offers the benefits of both worlds: stability with fixed repayment amounts and flexibility to make additional repayments.
3. Switch from monthly to fortnightly repayments
While you’re technically not paying anything extra with this strategy, simply changing how often you make your repayments, switching from monthly to fortnightly, means you make one extra repayment a year. That’s because there are 26 fortnights in a year, compared to 12 months, so paying fortnightly means you make 26 payments a year, the equivalent of 13 payments per year. Use this strategy to help reduce your mortgage term and save on interest.
4. Make lump sum payments
Lump sum payments directly reduce the principal amount owing, which can lead to substantial interest savings over the life of your loan. So, if you get any extra income, such as bonuses, tax refunds, or a windfall or inheritance, consider allocating this towards your mortgage repayments to help boost your progress and reduce your interest. Remember to check with your lender first to ensure there are no restrictions or penalties associated with making extra repayments.
5. Don’t reduce your repayments if interest rates drop
Instead of pocketing the savings each time interest rates drop, consider keeping your repayment amounts at the same level. Keeping your repayment amounts consistent, helps you pay off your home loan sooner and save on interest charges, taking you closer to achieving financial freedom.
Get ready to accelerate your mortgage repayment journey
The key to a successful home loan restructuring lies in finding the right balance between fixed and variable interest rates. Working with a knowledgeable mortgage adviser can help you determine the optimal structure for your individual needs.
Book a mortgage review with a Mortgage Express branded mortgage adviser today to ensure your mortgage is set up to maximise savings, improve your chances of repaying your mortgage early, and achieve your mortgage-free dreams.
