For mortgage loan repayment, many families, especially those who envision an early retirement, a loan free property seems to be a shared goal. Those who follow me shared their goals of paying off a mortgage during the challenge: Kick Start your Wealth.
While the thought of investing your extra funds exists, rather than put it aside for the home-loan, the logic behind this thinking is that the interest in mortgage only costs 4.5% p.a. Whereas choosing to invest the surplus that would possibly return a rate of 9%p.a. makes you out as the winner in all this.
We chose not to use this method despite the sound reasoning behind it as we found it more appealing to be able to offer our children a secure roof over their head. It will imply that the degree of easy revenue we have to live off for our ventures is significantly less than when we have to support a home advance too. On the other hand, on the off-chance that you have removed all high-rate obligations and a good emergency account, the next objective of settling your home loan would be extraordinary.
- Include money benefits — Transferring money from inherent bonuses is a great way to deal with your home loan; added benefits from a work bonus, inheritance and so on. Funneling money from the money you receive from doing surveys and cashback sites can also be beneficial for you. You can calculate the interest rates saved by using Mortgage Extra Payments Motivator.
- Round off installments — Take for example your installments add up to an odd number. By rounding off the number, you get used to paying the extra dollars that soon makes a dent on your mortgage. Much like the app I’m using, Acorns App, the balance always builds up well and rounded to the closest dollar.
- Pay more frequently — Instead of a monthly repayment, I suggest a WEEKLY or BI-WEEKLY payment instead. This way, you won’t be noticing the amount when really, you’re paying your dues earlier!
- Try not to lessen repayments — It would be advisable to continue your loan repayment at the same amount or higher, should interest rates go down for you. Aside from saving on interest, in the case that they start to rise again, you would already be able to stick to the amount you’ve been paying.
- Better rates from the banks— In one of my previous tips through Free Email, and my posts before, I mentioned that calling your bank to let them know your plan on moving to a competitor is undoubtedly worth it with no hassle at all. Every year, I call my bank without fail and have my interest reduced. This knowledge is thanks to my friend, who had working in banks under the marketing team and more often than not, they are always willing to offer discounts up to a certain degree to loan repayment.
- Actually, consider the move — While getting better rates after a call is good enough, sometimes it is much better to refinance to a different bank for a different class of a deal. By dealing with my trusted broker of six years now, we trust him for any refinancing issues. Not many have the right broker that fulfils a persons’ needs however, so it can be a slippery slope. Brokers don’t charge you to see them so it’s best practice to find one that is just the right one for you.
- 100% offset accounts only — Be sure to use a 100% offset account that you can attach to your mortgage so that whatever fund that you funneled into this account will assist in lessening the interest amount.For my family and I, we’ve set aside all our funding in the offset account. However, if you want to put billing and other savings funds into a different account instead, try and talk to your lender if they have such a service whereby, they can link several offset accounts to that mortgage loan.
Check our post on How to choose best bank account for you
- Don’t get played by the honeymoon rates — Similar to how the bank has promotions and deals to invest with them, these promotions can be applied to mortgages. Your first year or so may have a good rate, but after those terms expire, the interest reverts to a much uninteresting rate. This marketing scheme targets those who move loans less frequently and usually there are also fine prints that require you to keep the loan with the bank after the promotional rate ends. In my past experience, I’ve observed that these honeymoon rates don’t turn out to be as successful long-term.
- Have your first installment liquidated before due — Typically, you have about 30 days until the first due date for your new loan (or recent refinance move). By making the repayment instantly will go a long way in decreasing the amount of the principal loan.
- Consider having dual income property — A helping hand in paying for the mortgage is another way to reduce it & for loan repayment! We added a self-contained living area to one of our investment homes so that earnings from the rent could go to paying for our home. This means someone else has been helping us pay for at least 50% of our mortgage.
- Use Airbnb — The thought of renting out space to a total stranger isn’t all glitter and gold. Try the flexible home/room rental app to let your space out while you’re on an extended holiday or whenever you’re comfortable. You can use this link to rent https://bit.ly/2EIgNCC
- Rent out the parking space — The garage rental is pretty close to the Airbnb notion albeit less invasive to having a stranger walk around in the house. While this isn’t for everyone, living close to the city has its’ benefits when your car is not parked in there all day.
- Reducing the clutter — Downsizing is a far more radical move but say you have large loan equivalent to the size of your house, the option of moving to a smaller place that is also equivalent to the size of its’ loan could be much faster to repay. But before making the move, calculate the costs incurred such as as stamp duty, moving and legal fees and if it is within reason. In a perfect world, my family would like a larger space but retiring early means we make do with our current two-bedroom home. It was quite normal as before when I used to share a room with my sister.
- Move to a smaller city — A large, metropolitan city like Sydney means purchasing and keeping such a home in it can be extremely costly. Currently, we are thinking of making the move to a regional city instead so that we can purchase a lot mortgage free.
As this is the site for rich ideas of income, savings, investments, interest calculations, choosing best bank accounts, choosing personal loan, mortgage and growing your money, so please comment how you like these tips & also include any more ideas if you have, in the comment section or on the MoneyDea Facebook page.