At the start of a new year, many people commit to doing things a little differently in the year ahead by setting New Year’s Resolutions. Often these New Year’s Resolutions centre around saving more or spending less. If you’re committed to improving your financial situation this year, why not start with these tips to help you pay off your mortgage faster.
1. Restructure Your Mortgage For More Flexibility
Many New Zealanders are already taking advantage of split mortgages. These hybrid mortgages offer the ability to combine the benefits of a fixed interest rate, a floating or variable interest rate, and a revolving credit home loan.Splitting your mortgage across several fixed rate periods and then committing to paying off that amount before it comes up for refixing is a big commitment, but it could shave years off your mortgage repayments and save you a fortune in interest charges.Leaving part of your mortgage on a variable interest rate means you get the added bonus of any interest rate fluctuations. And with interest rates currently tracking downwards, that means your home loan repayments keep decreasing too. If you’re paying your mortgage in monthly instalments, switching them to fortnightly instead means you’ll make 26 repayments – the equivalent of 13 monthly repayments –essentially an extra month’s worth of repayments into your mortgage every year!
2. Refinance Your Loan But Don’t Change Repayments
The easiest way to pay off your mortgage faster is to find a better rate than the one you currently have, while maintaining your repayments at the existing level. The same applies when interests rates drop – keep your mortgage repayments at the current rate to help clear your mortgage sooner.
Making a lump-sum payment over and above your regular mortgage repayments – like a work bonus, tax return or extra savings – could help reduce your principal loan balance so your interest charges decrease too. With a lower interest rate, you’ll save money overall.
It’s important when refinancing that you look for a lender offering flexibility to make extra repayments. If you’re nearing the end of your loan term, get in touch with a Mortgage Express adviser to find out what refinancing options may be available to you.
3. Cut Back on Unnecessary Spending
This one’s an obvious one but worth mentioning anyway. Committing to paying more into your mortgage and working towards being debt-free, goes hand-in-hand with cutting out unnecessary expenditure.Sure, it’s not fun sacrificing those extra little luxuries, but even the smallest amount paid into your mortgage instead can make a difference! Every extra repayment pays down your principal loan faster, saving you thousands of dollars in interest.If you don’t already have an offset loan account, consider setting that up too. Offset accounts work when your savings account (where your salary is paid into) is linked to your home loan account – the balance in this account is offset against the balance in your home loan account, and you’re only charged interest on the difference between the two.With your repayments staying the same while you pay less interest, more of your repayment goes into clearing your principal loan, so your money is working harder for you.
A Fresh Start
Start this new year with a solid plan for getting your finances on track. Contact Mortgage Express to find out more about how to pay down your mortgage faster, get onto the property ladder, or grow your property portfolio with an investment.
Disclaimer:
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
A Disclosure Statement is available on request and free of charge.
