Hi guys welcome back to Money Monday.
So, yesterday I was having a conversation with a really good friend of mine and I
was sharing with him that one of my biggest financial goals that I’m most
passionate about is paying off my mortgage as quickly as possible. Ideally
having the whole mortgage paid off in less than 10 years. Now, whilst people
that was a really admirable goal to have he actually thought it was quite
ridiculous and told me that it was completely unattainable and totally
unrealistic I would be honest I actually felt quite sorry for him because I
realized he doesn’t know that the potential that exists within him to
achieve amazing financial goals when you put your head heart and mind to it. So, I
want to share with you and my special friend things that you can do today that
will help pay off your mortgage so much faster and save you tens of thousands of
dollars if not even hundreds of thousands of dollars an interest and
help you create that financial freedom a lot sooner.
So, here are my top 10 tips as to how to pay off your mortgage as quickly as
possible. Tip number one is to keep it simple.
Often only take out new loans. The banks are really keen to sell us all these
bells and whistles such as credit cards and line of credits and often these
things come with expensive fees that can really eat into our budget. Actually what
I don’t like about these things is they can often be distracting. Create a false
sense of security especially if you’re less money, sitting in your line of
credit but don’t realise you’ve actually got to pay your home loan off and they
also really slow you down in your ability to peripheral mortgage as fast
as possible. So, my advice is have a very simple home
loan principle and interest and focus all your energy on paying that loan down
as quickly as possible and of course follow under the next steps. Tip number
two is to really check your mortgage and stay informed now in the first year of
taking a mortgage most of your mortgage repayments are serving pretty much 90%
of the interest payment you’ll barely see any reduction in the principal loan.
Now, this can be quite depressing but what I recommend you do because energy
flows where attention goes. Every time you pay your mortgage log in to your
internet banking have a look at how much of the loan is actually reduced. Each
month you will see that each repayment is servicing less in interest and more of the loan reductio. Now, this is when you can get
excited because you know from this point onwards your loan is going down and your
loan is getting smaller which means it’s easier and quicker to pay it off. Tip
number three is to find small but regular increases in your mortgage
repayments. Never underestimate the power of small extra repayments over the long
run. For example, if I take a four hundred thousand dollar mortgage with an average
interest rate of six and half percent I pay the minimum mortgage repayments over
a 30-year term but then I increase my mortgage repayments by fifty dollars per
week which is say the cost of lunch every day at work. I will save over a
hundred and twenty thousand dollars in interest over the life of the loan and I
will pay off my home loan six years earlier
you’re probably wondering that’s great canner but where am I going to find an
extra $50 per week to increase my mortgage repayments well actually there
are lots of things you can do you could go through your budget look at reducing
things temporarily or cutting things down or completely cutting them out to
find that extra $50 per week you could also take any potential upcoming pay
rises with the architects difference and increase your mortgage repayments by
that or even more you could even look for some extra work maybe on the weekend
you could also follow along with a thousand dollar project and see all the
weird and wonderful things that I’m doing to help come up with extra cash
and finally you could just occasionally exercise some self-control or willpower
and simply say no to buying a few things here or there or going to a few things
here or there that could be quite expensive those little things really do
add up across a period of a year tip number four is to try and pay any lump
sum cash amounts onto the mortgage. Now, if I have to take that same loan for
$400,000 with an average interest rate of six and a half percent over a 30-year
term and I put say $10,000 as a lump sum towards that home loan within the first
three years I would save over forty four thousand dollars in interest and pay off
my home loan one year and nine months sooner. So again, you’re probably
wondering where would I come up the nectar $10,000 magically out of thin air
to pay the love sum towards my mortgage well I accept no excuses as I said you
can follow along with $1,000 project I managed to come up with
$32,000 over a 12-month period so imagine what you could do but again
there are the same things you could get a tax refund you could get a commission
check or even a bonus you could sell a few things you could get an extra
part-time job or take on some extra projects at work again the sky’s the
limit and what you put in you will get out number five is to maintain mortgage
repayments now this is in particular reference to an interest rates are going
down no matter how tempting or no matter how much pressure or encouragement the
bank tries to take for you to reduce your mortgage repayments don’t it’s a
trap it will delay you paying off your mortgage it’ll end up paying a lot more
money in interest trust me when interest rates are going down don’t fall into the
trap make sure you maintain your mortgage repayments so that you are
actually servicing and reducing more of the mortgage principal and paying a lot
less interest to the bank of the consequence number six is start today
the sooner you start tackling paying down that mortgage the better the
earlier you start paying extra payments making lump sums channeling all your
energy into paying off that home loan as quickly as possible the bigger the
impact you’re going to have in that example where I make an extra $50 per
week in mortgage repayments on that four hundred thousand dollar loan if I were
to delay that process and start making those extra repayments in say year eight
with a $50 per week my ability to reduce that loan isn’t quite as dramatic it’s
still great don’t get me wrong but would mean that I only save fifty six thousand
dollars in interest and I only saved three years and five months off my home
lines it’s never too late to start paying off debt but this is just
something to take in mind if you’ve just recently taken out a new homeowner so do
not delay in paying off your home loan tip number seven is to try and pay your
mortgage on a fortnightly basis instead of a monthly basis now very simple math
behind it because there’s twenty-six fortnight’s per year and only twelve
months per year you actually managed to sneak in an extra payment per calendar
year so that will actually help in reducing that principal which means
you’re paying a lot less interest which means you’re paying laws of principle
off answer compounding interest working for you for
some people on a really tight budget this can be a little bit challenging
with managing your cash flow so if this is impossible that’s okay don’t fret
just make sure you pay your mortgage repayment the moment you get paid so
it’s up the top of the list of pros of expenses tip number eight is shop around
the difference in an interest rate of say half of the cent doesn’t really
sound like much of a savings especially over a 30-year loans but that couldn’t
be further from the truth on that four hundred thousand dollar
loan difference between of paying interest rate of C six percent versus
six and a half percent means you save about forty seven thousand dollars in
interest now I don’t know about you but I would much prefer that forty seven
thousand dollars paid off my mortgage than in the bank’s pockets offense to me
however one very important note with refinancing if you do decide to shop
around do not restart your mortgage term for example say you’re seven years
through a thirty-year home loan and you decide to refinance with another Bank
they’ve got a much better interest rate do not go with the bank’s new 30-year
term that means you are restarting a whole journey of paying off your home
loan insists that you go to a 25-year low home loan period or a 23 year home
loan period or even sooner if you can manage the mortgage repayments because
you want to make sure you’re not delaying the process of making that
final magical mortgage repayment moment where you see your mortgage got to the
magic number of zero tip number nine is to use offset
facilities and redraw facilities to park any space savings that you might have
this will mean that you are able to save interest of your home loan in the
meantime because your payment will be reducing more of the home loan rather
than just servicing the interest because the interest will be less if you’re
number 10 is to understand why it is so important to pay off your home loan and
then to make it your number one financial goal when you have no mortgage
it means you can potentially retire a lot sooner because your cash flow does
not require servicing a whopping great big stressful mortgage it means that you
can take a career path it means you can help more family and
friends around you it means you can give more to charity it means you can go on
more regular holidays and buy more nice things most importantly it gives you
more time and more financial freedom so if you have a home loan and paying off
your mortgage wasn’t one of your financial goals make sure that you make
it today and make sure you take the right steps and the right actions today
to start paying it down and get excited about it getting smaller and smaller and
more manageable you will feel the benefits of less financial stress on
your shoulders I promise and to my very special friend I hope you now realize
that you too can also pass your home loan in less than 10 years and you are
very lucky to have such a good friend that is a financial planner and is going
to show you exactly how now on that note if anyone is interested in having a
Skype consultation with me where they discuss their financial goals head over
to the sugar mama website and you can book online now this week I’ve set
myself a bit of a cheeky challenge I’m going to see if I can raise a thousand
dollars in less than seven days so to try and do this I have gone a little bit
crazy and I’m selling a whole pile of stuff on eBay so I’m going to put in the
description box below my eBay account and you can see if I can actually
achieve this challenge or not fingers crossed someone wants to buy my stuff
anyway if you’re interested in setting yourself your own challenge for the six
seven days let me know how you go if you haven’t already please make sure you
subscribe and this week’s lifestyle our video is another fashion capsule
wardrobe video and I cannot wait to share it with you I hope that you’re
having a great start the week and I will see you on Thursday evening for
lifestyle love ciao for now bye