Pay Mortgage Faster
For example if you haven’t already purchased a property and committed to a mortgage then there are possibly some important considerations before you do.
Nonetheless, the most important element of how to pay off your mortgage fast is applying good money management skills. If you don’t already have these skills and you’re genuinely into improving your standard of living and quality of life then learning these money saving tips will pay handsome dividends.
If you already have a home loan then picking up on how to pay off mortgage faster ideas quickly may have to be approached from a slightly different angle.
Affordable Home Loan Debt.
The single most important thing you can do in this situation is to keep your home loan debt well within your affordability capabilities. This may mean purchasing a home below your ultimate dreams and desires and getting a home loan for less than the maximum the bank is willing to lend you.
Why is this? This will allow you to take advantage of the two most important dynamics of property equity creation, faster debt reduction and capital growth.
You’ll have money left over each month that can be used as extra home loan repayments towards the principal balance of your home loan.
With the second scenario where you already have a home loan and there is no money left over at the end of each month to make extra home loan repayments, then a different strategy will be required. This will be in the form of learning how to develop more money saving ideas.
From this point forward the following information will be relevant to both scenarios.
How does an offset account work to your benefit?
Offset accounts work like any of the normal savings/chequeing accounts in that you can use it for your everyday banking transactions. The big difference is that any money you have sitting in a mortgage offset account on a daily basis helps offset the interest payable on your home loan.
In other words let’s say you have a $300,000 mortgage and you have $10,000 sitting in your mortgage offset account. Because of the way offset accounts work, the 10,000 offsets against the $300,000 and you only pay interest on $290,000 for as long as the $10,000 remains in the account.
Help Pay Off Mortgage Faster
To further facilitate the benefit of this strategy most lenders will allow you to set up an automatic electronic sweep for any balances on the card at the end of the month to be swept back into your offset transaction account.
In the meantime, you’ve been able to use the banks money interest free by not having to take extra money out of your mortgage offset account, which while it’s still sitting in there is offsetting against your home loan and saving you even more interest.
More details of how to take advantage of interest free credit cards and offset accounts will be dealt with in an additional page on this website to be created in the near future.
Also, there are other great benefits to being good at money management besides just financial ones and that is in the way of a better quality stress free lifestyle.
Many people live on the edge of financial disaster for most of their lives. In fact if they lost their jobs tomorrow many would not have enough cash put aside to support themselves and their families for 3 months. It’s wise to discipline yourself and figure out debt solutions that will enable you to spend less than what you earn.
For those that find saving money voluntarily is difficult there are ways to establish debt solutions that make it easier to channel that extra money into the mortgage loan.
There’s an old philosophy that says necessity finds it own level (a bit like water).
No, you take control of this and take the bank calculated monthly principal and interest repayment and divide that by two. The result of this calculation now becomes your new fortnightly repayment.
As there’s on average 4.33 weeks in a month, by paying this amount you will end up making one whole extra repayment a year.
I can hear some of the protests already. About not having any money left over at the end of the month already, where am I going to find the money to do this?
This is all about learning the money management skill of how to pay yourself first. It means making it a priority in your life to learn this skill. It means having to take responsibility for your own future.
This will then allow for enough equity to purchase another property for investment purposes. However, the how and when of buying an investment property needs to be carefully reached and the property finance structured correctly with an interest only mortgage in order to ensure it’s a healthy positive cashflow property where the excess cash flow can be channeled into the existing owner occupied home loan to help pay it off even faster.
Spend some time on researching how to pay mortgage off faster strategies and become the next home loan winner.
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