How to pay a mortgage off faster
Mortgages are most often a person or family’s largest type of loan and are one of the most important things to review to stay on top of your money. Paying off your mortgage early can be a massive saver in the long run by lowering the amount of interest that needs to be paid.
In this blog post, we run through some the things you can discuss with your mortgage broker about how to pay your Avanti Home Loan off earlier.
INCREASE YOUR PAYMENTS
A simple option: increasing your payments can save you money on your interest. Even a small increase can make a huge difference to the overall cost of your loan!
For example, take a 30 year, $500,000 home loan with a 5%p.a. principal-and-interest interest rate. Making an extra payment of $40 a month will take a whole year off the length of the loan and could save you around $18,222 in interest. If you can afford to, increasing your payments by as little as $40 can be a simple way to pay off a mortgage faster.
MAKE A LUMP SUM PAYMENT
Paying a lump sum off your mortgage can save you thousands in interest down the line. Making a lump sum payment gives you the opportunity to make a payment on the principal of the loan – that’s the amount you first borrowed – not just the interest.
If the chance arises, making a lump sum payment can put you much closer towards achieving your dream of a paid-off mortgage. You may have just inherited some money recently, or just received a bonus at work. In any case, consider using a sudden influx of cash to pay off your mortgage a bit faster.
CHANGE FROM MONTHLY TO FORTNIGHTLY PAYMENTS
One way Avanti home loans can be changed to benefit your repayment plan is by changing your payment frequency.
By changing your repayments from monthly to fortnightly, you add two extra repayments within the year. This will help you pay your mortgage off faster but won’t make you feel that you are being stretched beyond your means.
This will depend on how your payments are calculated though, so double check with us on the payments/savings before committing.
DON'T DROP YOUR PAYMENTS WITH INTEREST RATES
When interest rates drop, it can be tempting to also lower your repayment amounts to free up some extra cash for other things. If you resist this urge and keep your repayments as they are, then you could save yourself a sizeable amount on your mortgage.
This strategy has the benefit of saving you money without making you feel like you’re stretching yourself.
If paying off your mortgage as soon as possible is your number one priority, then choosing a mortgage with floating rate (aka variable rate) instead of a fixed rate can potentially help you achieve your goal.
Fixed-rate mortgages can often restrict the amount you can pay back early, which can be particularly frustrating if you have the means to make an extra payment or payments. Variable rates are much more flexible for people looking to make early repayments without needing to pay extra.
DISCUSS YOUR MORTGAGE TODAY
If you want to learn more about the ways that you can pay off your mortgage earlier then speak with your mortgage broker about an Avanti Home Loan today. Avanti Finance also provides simple ways to top up your loans or change your details through our site. Get ahead with your home loan today.