For many, the thought of refinancing is enough to put you off. All the red tape, paperwork, hours of research can be daunting. Use these simple tricks to shave thousands of dollars off your mortgage and ensure you're debt-free faster. So here's how to pay off your mortgage faster.
Change to weekly or fortnightly repayments
Changing from monthly payments to a weekly or fortnightly repayment is one of the smartest tricks to adopt and probably one of the easiest strategies to follow if you want to get your debt off your back sooner. Despite its obvious advantage to you as the consumer, not many bankers would recommend this option.
Here’s the simple mathematical proof:
If you have a $500K loan with a rate of 3.90% and repay your loan monthly at $2400 you would end up paying $336K in just interest over the next 29 years. Changing to a fortnightly repayment will end up saving $50K and pay off your loan about 4 years ahead of schedule.
Most banks will actually let you change your repayment frequency via online banking, but if this isn’t an option for you just call your bank and get your repayment changed over the phone.
Make additional repayments
If you have any additional funds available to put towards your mortgage, for example you might choose to stop your ‘to go’ lunches during the week and manage to save $50 per week to put into your mortgage, increasing your repayment by $100 each fortnight.
Sticking to the same example we used above:
if you are have a 500K mortgage with a rate of 3.90% and now make fortnightly repayments at $1200, adding your extra $100 will end up saving you a further $39K and 3 years off your mortgage.
These two steps effectively saved you a splashing 89K and a total of 7 years compared to your default slow and dreadful minimum monthly repayment plan.
Invest some time and haggle
Generally banks have two pricing structures. One for the back book (old mortgage customers) and the front book (new and fresh mortgage customers). Just like a new toddler who steals the spotlight from their own sibling, the front book is given plenty of preferential treatment. Banks will never reward you for your customer loyalty with a reduced rate even though they have the technology to identify loyal customers, they keep you on the same rate in order to maintain their profit margins.
With a simple call to the bank you should be able to get a reduction of about 0.10%-0.50% at the very least off your loan. But here is the catch, to be on top you have to do this every year. I know a customer who always calls her bank on her birthday and gets them to reduce the rate which is probably the best birthday gift she could gift her self.
All you have to do is ring your bank and say that you have been approached by one of the other banks with a good enough rate for you to refinance your loan out (if your loan is with a big 4 bank, say that the competitor also happens to be a big 4. Always remember that the big 4 hate losing customers to each other and use this to your advantage).
Keep the same repayments going as per earlier recommendations, fortnightly and any additional repayments you can save thousands more.
Make paying off your mortgage a priority
This is not technically proven by calculating rates and numbers. But when priorities are set, it becomes a focus, it becomes an important factor in one's life. Taking a 25 year mortgage and repaying this debt is one of the main reasons we work hard and earn a wage, as well as putting up with uninspiring bosses and workplaces. All this to call this place on earth ‘our home’. Being debt-free and having a place to call home is probably one of the best feelings you could have. So keep the focus and make paying off your mortgage a priority.
At LoanDolphin, we hate seeing people paying any more than they need to, so don’t be turned off refinancing your loan by thinking it is too much work. LoanDolphin will do all the work for you so do yourself a favour and stop contributing any more than you need to be and enjoy a debt-free life sooner.
Click here to find out how LoanDolphin works and start the bidding process to get you the best home loan.