How to Pay Off Your Mortgage Faster
A mortgage can be a scary beast. It can be daunting to think you owe hundreds of thousands of dollars and will be paying this debt off over 20-30 years. But there is a light at the end of the tunnel. Getting mortgage free sooner frees up your income for other things – renovations, travel, children and enjoying life.
But how do you pay off your mortgage faster? Simple – you need to pay more than the minimum repayment. Even paying $50 more per week can reduce a $400,000 mortgage by 4 years. Paying more each week also decreases the amount of interest you pay over the term of your loan.
Before you even apply for a mortgage, work out your budget based on a higher interest rate and shorter term. Mortgage rates will rise and fall over the course of your mortgage, but if you always pay more than the minimum, you’ll pay it off sooner and you won’t notice the fluctuations.
Most people struggle to find ways to come up with the money for this increased repayment. But if you look at your household budget you should be able to find an area you can cut back. Do you need to eat dinner out four nights per week? Could changing your supermarket or shopping at a farmers market decrease your food bill by $50 a week?
If you receive a pay rise, add at least half the cost of this to your mortgage repayments. You won’t miss the money, since you were surviving fine without it, but you can shave years off your mortgage by continuously topping up your payments with pay increases.
Paying off your mortgage as soon as possible has untold advantages. Imagine being mortgage free in 15 years, when you’re still working full-time and can enjoy the freedom owning your home freehold means. You might struggle for the first few months, but eventually you’ll get used to it, and the rewards on the other side make it worthwhile.