Some tips for trimming the cost of your mortgage from our partners Mortgage Express
As a property owner, paying off your mortgage before you retire is important. Once you hit retirement age, the last thing you want is to still be saddled with debt.
Here are some ways to help reduce your total mortgage and help you buy your property for less:
Shorten your term
Reducing your mortgage term to 20, 15, even 10 years shaves thousands of dollars in interest off the total. Even reducing by one year can save you.
For example, if you borrow $750,000 at 5.65% interest over 30 years, your interest on a principal and interest loan amounts to $808,537. Shorten your mortgage term to 25 years and you reduce your total interest to $651,925.
It does mean your regular repayments will increase, so be sure to check your budget thoroughly to see if it’s possible.
Make additional payments
If you’re unable to commit to shortening your mortgage period, keeping a portion of your mortgage on a variable rate or having a revolving credit mortgage, which works much like an overdraft, may be the answer.
Pay fortnightly instead of monthly
By making mortgage repayments every fortnight instead of once a month, you effectively make an extra month’s payment; so 13 repayments instead of 12, reducing the overall time it takes to pay off your mortgage.
Look out for refinancing deals
Look for refinancing offers with more flexibility or a better interest rate. Be sure to factor in any costs for refinancing when considering this option.
It’s worthwhile reviewing your mortgage on an annual basis to ensure you’re getting the best deal. Your mortgage specialist can help with a financial health check, to help you find savings.
If interest rates drop, keep repayments at your current level, rather than be tempted to spend the savings. By doing this, you’ll shave off a substantial portion of your loan principal.