15 Sep Why Would You Increase Your Repayments?
Why would you increase your repayments?
Paying off a mortgage can seem relentless – every payment counts of course, but it can seem to be taking forever to make a dent.
Reducing the principle on your mortgage as quickly as you can will mean paying less interest, so your future payments are going even further towards reducing that principle. That means you can pay off and own your home sooner!
So, here are five simple ways to increase those mortgage repayments.
Ignore the bank
Well, sort of. Don’t pay any attention to the amount that you are told is the minimum repayment, as long as you pay more. Work out the most you can afford to pay, think of this as your minimum repayment, budget for it and stick to it.
Think of every step you take towards reaching your goal of owning your property outright as a way of treating yourself. Sure, an expensive bottle of wine is nice, but doesn’t taking a year off your loan taste pretty sweet, too?
Every single increase to your income, no matter how small, should be channelled into the debts that are incurring the highest interest. If this is your mortgage, send it there. Do the same with your tax returns, any bonuses at work and even cash gifts.
Track your spending
We all do need to enjoy life but also have a think about all those little things you don’t even really notice. In one week, that extra coffee in the morning, a sandwich from the cafe instead of one you have made yourself, that extra round of drinks you probably shouldn’t have shouted on Friday night or getting your nails done on Saturday can add up to $150. Over a month, that’s $600. Increasing a monthly repayment by that $600 per month could trim more than 10 years off the term of a $500,000 loan.
Now, how much do you really want that coffee?
Eyes on the prize
Watch the forecast on your mortgage – seeing it go down will motivate you to work even harder.
To find the ideal balance between the extra repayments you can afford to make and the time this will shave off your mortgage term, use our calculator here: http://www.truewealthfinance.com.au/calculators/ (scroll down to extra repayment calculator)
Talk to an expert
Talking to your finance broker about refinancing options could reveal a way to pay down your debt sooner even without increasing repayments. A finance broker will be able to look into whether you may get a better interest rate or lower fees with another lender, or even with your own, and will be able to help minimise any refinancing costs.
This is especially important each time your goals or your financial circumstances change. If you are earning more than when you took out your loan, you have paid off a personal loan or a credit card since that time, or your property’s value has risen, your finance broker may be able to negotiate a far better deal than the one you are on.
For example, if your finance broker negotiated your interest rate down by just half a per cent on a $500,000 loan, it could save you over 3 years on your loan term.
Get in touch with us today to find out more about what might be possible for you.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. Your full financial situation will need to be reviewed prior to acceptance of any offer or product and is subject to lenders terms and conditions, fees and charges and eligibility criteria apply.
Credit Representative 487350 is authorised under Australian Credit Licence 389328