As a first-time buyer, or a current homeowner looking to refinance, you’ll find that it pays dividends to create a mortgage repayment strategy.
Don’t make the mistake of just following your lender’s instructions.
If you play the game smartly, you’ll discover a few tricks that will shave thousands of dollars off your payment schedule.
Making just a handful of clever decisions may give you a chance to obtain a larger loan; whether you’re thinking of buying your first property or seeking to climb the property ladder.
And let’s face it, no one wants to pay more money than they have to, especially with the prospect of interest rates continuing to rise this year.
These are just some of the tactics real estate buyers adopt to reduce the term of their loan, or maximise the amount of money that goes towards paying off the loan principal.
Round up repayments
If you face a monthly mortgage repayment of $2,253, then round it up to $2,300. You’ll never notice the difference, but it can make a huge difference over the duration of a 25-year loan.
Rate alert
When interest rates rise, check what happens to your monthly payments. If you’re paying above the standard rate, make sure your lender doesn’t let the increase swallow up your extra payment. Otherwise, you’ll not blitz your loan as fast as you thought.
Fortnightly benefits
You’d think a calendar with 12 months would have 24 fortnights. But it doesn’t. It has 26. So you can accelerate your repayments and minimise interest costs by paying your mortgage fortnightly. Over a year, you’ll make the equivalent of an additional monthly repayment. Over a 25-year loan, that’s a lot of cash saved.
Clever accounting
If getting the lowest interest rate was your focus when you took out a loan, you may have missed the opportunities offered by an Offset Account. It’s a deposit account linked to your mortgage. Your wages and savings sit in this account and minimise the amount of interest charged to your mortgage. It’s a sweet arrangement for many, and a broker will explain it all to you!
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.