24 Mortgage Tips and Tricks HTML version
Make more frequent payments
The simple in life are often the best. One of the simplest and best strategies for reducing the
term and cost of your loan (and thus your exposure should interest rates rise) is to make your
repayment on a fortnightly rather than monthly basis. How can this make a difference I hear
you ask? It works like this:
Split your monthly payment in two and pay every fortnight. You’ll hardly feel the difference in
terms of your disposable income, but it could make thousands of dollars and years difference
over the term of your loan. The reason for this is that there are 26 fortnights in a year, but only
12 months. Paying fortnightly means that you will be effectively making 13 monthly payments
every year. And this can make a big difference.
Using our example from above, by paying monthly, you will need to repay $640,126 over the
term of your loan. By paying fortnightly, you will save $48,534 in interest and 4.5 years off the
loan. Zero pain to you, major benefit to your pocket.
Hit the principal early
Over the first few years of your mortgage, it may seem that you are only paying interest and
the principal isn’t reducing at all. Unfortunately, you’re probably right, as this is one of the
unfortunate effects of compound interest. So you need to try everything you can to get some
of the principal repaid early and you’ll notice the difference.
Every dollar you put in your mortgage above your repayment amount attacks the capital,
which means down the track you’ll be paying interest on a smaller amount. Extra lumps sums
on regular additional repayments will help you cut many years off the term of your loan.
Get a package
Speak to your lender about the financial packages they have on offer. Common inclusions
are discounted home insurance, fee-free credit cards, a free consultation with a financial
adviser or even a fee-free transaction account. While these things may seem small beer
compared to what you are paying on your home loan, every little bit counts and so you can
use the little savings on other financial services to turn them into big savings on your home
There are also “professional” packages on offer for amounts over a certain limit, which can
be as little as $150,000. There are all sorts of discounts and reductions attached to these
packages so make sure you ask your lender about them.
This e-book was built to help you on your success journey, by the team at https://roy-mcdonald.net