Homeownership is an incredibly fulfilling experience, but it comes with a hefty price tag in the form of a mortgage. Home loans can stay with you for years, and the interest on it can add up to thousands of dollars. Thankfully, there’s definitely a way to take control of your debt. Paying off your mortgage quickly is manageable if you follow these simple yet effective financial hacks.
Make additional repayments
Go the extra mile by making additional repayments whenever you can. Just make sure that there aren’t any penalties involved with making these extra payments. You should also check to see if there’s a limit to how much or how often you can pay. In case you need the extra money that you put forth towards an additional repayment, you can always access it through a redraw facility.
Reduce your loan term
Besides lowering your interest rate when refinancing your loan, you should also consider reducing your loan repayment term while increasing the amount of your repayments, but only if you have the means to.
Watch out for prepayment penalties
Most mortgage lenders will issue a prepayment penalty if you pay off your loans before the maturity date. This is to discourage you from doing so since lenders turn a profit from the interest accrued over time. You can avoid this by either opting for a penalty-free loan, paying the maximum amount without penalty, or simply waiting it out. Most lenders only charge prepayment penalties during the first two to three years of the loan, so it may be worth it to hold back for the meantime.
Set aside a large down payment
It’s generally recommended that you save up as much as 20% of the home’s sale price when setting aside money for a down payment. But if the goal is to pay off your mortgage sooner, you should aim for at least 30% or higher. The more money you put towards your initial down payment, the less money you’ll need to repay in the future. It might delay your plans to buy a home by a couple of months, but it’s worth it if you don’t want to live with debt for very long.
Round up the amount to be repaid
Round up the amount you need to repay rather than paying the exact total. For example, if you need to pay $1450, round it up to $1500 and pay that amount instead. You’ll be able to chip off more money from your mortgage without biting off more than you can chew. This is a seemingly inconsequential habit that will pay off in the long run.
Purchase a home that’s below your budget
Whatever you’re prepared to spend on your home, purchase a property that’s below that amount. It won’t just be the sale price you’ll have to spend on once the property is under your name. You also have to factor in maintenance costs, utilities, and furniture — all of which can set you back tons of money if you aren’t careful. Opting for a home that’s below your budget or exactly within your budget ensures that you’ll end up with a mortgage that you can pay off within a reasonable amount of time.
You can enjoy the peace of mind that comes with knowing you’re debt-free with these practical financial hacks to pay off your mortgage sooner.