The average mortgage term in Australia ranges from 25 to 30 years, but you don’t have to be stuck with your mortgage for this long. Below are some tips and strategies that can help you pay it off sooner.
1. Pay more. If your specific type of loan allows it, then you can make unlimited extra repayments without penalty every month. This is usually the case with variable rate loans. By paying off bigger chunks of your loan every month, you’ll be able to shorten your loan’s term significantly. Keep in mind, however, that although you can make extra repayments, you’ll likely have to pay an additional fee if you have a fixed rate loan.
It is currently the ideal time to make extra repayments because of the low interest rates. Instead of spending the savings that you make from these low rates somewhere else, you could add it to your monthly repayments. You’ll pay off more of your loan without actually spending more than you have in the past.
2. Pay more frequently. Another strategy you can use is making split repayments. If you’re currently paying your mortgage on a monthly basis, you can switch to making fortnightly repayments.
For example, if you’re paying $1,000 per month on your mortgage, this translates to a total payment of $12,000 by the end of 12 months. Now compare this to making fortnightly payments. Since there are 26 fortnights in a year, you end up paying $13,000 after 12 months if you split your payments into $500 per fortnight. Splitting your repayments also allows you to pay off more of your mortgage without making a significant impact on your household budget.
3. Switch to a different loan. We mentioned earlier that only variable rate loans allow you to make extra repayments without any fees. But what if you currently have a fixed rate loan? Then you can choose to switch to a different loan product that suits your current needs. Today is the ideal time to do this because lenders continue to cut their rates in order to gain more clients, so there’s a good chance that you’ll get a great deal in the process.
If you decide to switch loans, it is a good idea to engage the services of a mortgage broker, who can make the process easier on your end. They can research loans for you, recommend particular products that suit your situation, and give you access to deals that you couldn’t have otherwise accessed on your own.
The key to paying off your mortgage sooner is by choosing a loan that is best suited to your needs and personal circumstances. A qualified mortgage broker can make it faster and easier for you as they can research and compare loans on your behalf through their extensive network of lenders.
Written by Warrick Greaves.