As a Nelson real estate agent, I know becoming a home owner is one of the most financially empowering decisions we can make.
However for many people, having a big loan is a hefty burden to take on, so paying it off as quickly as possible can become a high priority.
Here are 3 ways to significantly reduce your mortgage:
1. Pay fortnightly
The easiest tip is to make your mortgage repayments fortnightly instead of each month. There are 26 fortnights in a year, so you will end up with an extra month of repayments which can significantly impact the life of your loan.
2. Pay a bit extra
Although the bank might be happy about your long-term repayment plan, it is more beneficial to pay more than required in order to reduce the principal.
Make sure there are no fees for extra repayments before you commit – and ask if there is a limit. If you make any extra income, such as work bonuses, put this towards your repayments. Even a bit extra each fortnight can make a huge difference.
3. Link-up an offset account
Having an offset savings account connected to your mortgage can help to reduce it, by reducing the amount of the mortgage and therefore lowering interest to pay.
For instance, if $10,000 of savings is placed in an offset account for a $400,000 home loan, interest only needs to be paid on $390,000.
What tips do you have for reducing your mortgage? I’d love to hear from you – please leave your comments below.