Introduction
A mortgage is one of the most significant financial investments most Australians will make in their lifetime. For many people, paying off their mortgage can take up to 30 years or even more, depending on their loan term. However, there are several ways to reduce the length of your mortgage and become mortgage-free years before your loan term. This blog post provides you with the fastest and easiest ways to cut 10 years or more off your mortgage in Australia in 2023.
Increase Repayments
One of the easiest ways to cut down the length of your mortgage is by increasing your repayments. Most lenders offer flexible repayment options, allowing you to make extra payments on your mortgage. By increasing your repayments, you can significantly reduce the amount of interest you pay over the life of your loan, which can help you pay off your mortgage faster. For instance, if you have a $500,000 mortgage with an interest rate of 3.5% and a 30-year loan term, increasing your monthly repayments by $500 per month can save you $102,484 in interest and reduce your loan term by 6 years and 4 months.
Make Use of a Mortgage Offset Account
Another way to cut down the length of your mortgage is by making use of a mortgage offset account. A mortgage offset account is a savings account that is linked to your mortgage. The money you deposit into your offset account is deducted from your mortgage balance, reducing the amount of interest you pay. For instance, if you have a $500,000 mortgage with an interest rate of 3.5% and a 30-year loan term and you have $50,000 in your offset account, you will only pay interest on $450,000. This can save you thousands of dollars in interest charges over the life of your loan.
Consider Making Extra Repayments Using Your Tax Refund
If you receive a tax refund each year, you can use it to make extra repayments on your mortgage. This can help you reduce your mortgage term and save you thousands of dollars in interest charges. Instead of spending your tax refund on other expenses, you can use it to make a lump sum payment on your mortgage. For instance, if you receive a $5,000 tax refund each year and you use it to make a lump sum payment on your mortgage, you can save $35,103 in interest and reduce your loan term by 2 years and 6 months on a $500,000 mortgage with an interest rate of 3.5% and a 30-year loan term.
Consider Refinancing Your Mortgage
Refinancing your mortgage can also help you cut down the length of your mortgage. By refinancing, you can take advantage of lower interest rates, reduce your monthly repayments, and pay off your mortgage faster. Refinancing can also help you consolidate your debt and save money on interest charges. Before refinancing, make sure you consider the costs involved, such as exit fees, application fees, and valuation fees. It is also essential to compare different lenders’ rates and features to find the best refinancing option for your needs.
Consider Splitting Your Loan
Splitting your loan can be an effective strategy to pay off your mortgage faster. By splitting your loan, you can have part of your mortgage on a variable interest rate and part on a fixed interest rate. This can help you take advantage of lower interest rates while still having the security of a fixed rate. For instance, if you have a $500,000 mortgage with an interest rate of 3.5% and a 30-year loan term, you can split your loan into a $250,000 variable rate loan and a $250,000 fixed rate loan. By doing this, you can take advantage of the lower interest rates on the variable rate loan and still have the security of knowing that your repayments on the fixed rate loan won’t increase if interest rates rise. Splitting your loan can also be beneficial if you have different financial goals. For example, if you plan to pay off your mortgage in a shorter period, you can allocate more of your mortgage to the variable rate loan. Alternatively, if you prefer the security of knowing your repayments won’t increase, you can allocate more to the fixed rate loan.
Conclusion
Paying off your mortgage early can be a daunting task, but by using the strategies outlined in this e-book, you can cut down the length of your mortgage by 10 years or more. Increasing your repayments, using a mortgage offset account, making extra repayments using your tax refund, refinancing your mortgage, and splitting your loan are all effective ways to pay off your mortgage faster. At Property First Investments Pty Ltd, we understand that everyone’s financial situation is unique. That’s why we offer personalized strategies tailored to your individual needs. Our experienced strategists can help you create a plan to pay off your mortgage faster and achieve your financial goals.
So, if you’re looking to cut 10 years or more off your mortgage in Australia in 2023, don’t hesitate to contact Property First Investments Pty Ltd. Our team is ready to assist you in creating a plan that works best for you. We will show you how to stream line this process and pay off your mortgage in 10 years or less. Click here to complete our assessment form and one our strategist will contact you to discuss the best strategy for your individual needs.