The secret to paying off your mortgage faster
The secret to paying off your mortgage faster is not really a secret, it's simply to pay it off faster!
Confused? Don’t be. It’s simple. Make more repayments more frequently and save thousands of dollars in interest, then use those thousands of dollars of saved interest to repay your loan principal even further. Do this and you’ll shave years off your loan. Let me know show you how.
On a $500,000 loan at 5.75% interest over a 30 year term, the amount of interest you will pay is a whopping $550,431.
By increasing repayments by just $20 per week, you will save $24,438 in interest over the loan term. Should you channel those savings back into your loan, you will reduce your loan term by 13 months. For the price of four cups of coffee a week, you could shave over a year off your loan, imagine what you could do if you doubled or tripled that. The best thing is, the more you repay, the more interest you save, like a reverse compounding interest effect. Can you afford not to spare $20 a week?
The not so obvious secret to paying off your mortgage faster is by structuring your loan correctly to save even more interest.
This works by having a small portion of your loan on floating where your income and savings are channelled into just like a normal transactional account. Think of it like a bucket, while your money is sitting in your buckets, it’s offsetting against your debt reducing your daily interest costs. The rest of the loan can be fixed enabling you to take advantage of today’s lower fixed rates. When your savings have filled the buckets up and you have no more space to offset your money, they need to be emptied. At this time you can choose to either make a lump sum payment off your fixed loan (up to the 5% threshold per year) or use the money for one of your planned financial goals.
A personalised loan structure is important to helping you pay off your mortgage faster so you can avoid costly break fees. I help you work out the best loan structure for you and your needs.
Jiji helps her clients save interest, repay their mortgage faster and equips them with a plan that is regularly monitored and reviewed. Talk to Jiji today for a free review of your mortgage to see how much you could save.