Updated: Aug 4, 2021
Many people believe, without a specific reason, that they cannot live mortgage free. This is simply not true. With the right planning and determination, you can become mortgage free by following some of these steps.
Lower Your Interest Rate
If you haven't checked that you're on a low interest rate since you got your mortgage, this is the first step you should be taking. If you're paying less interest on your loan, it means you will be able to afford higher monthly repayments, if you choose to, thus allowing you to pay off your mortgage faster.
For example, if you have a $123,000 at an interest rate of 2.63%, your would be repaying $560 monthly. But if you refinanced to a lower rate at 1.63% BUT still kept your repayments at $560, you would cut 3 years and 3 months off your mortgage.
This is where having a broker comes in handy. At AAA for instance, our services extend far beyond the settlement of your loan, we keep an eye on the market and your loan, for the WHOLE loan term, and let your know if a good opportunity to refinance comes up.
Open an Offset Account
An offset account is like a savings account linked to your mortgage. Having one would reduce monthly repayments and enable you to access funds should you need to. The amount of money in your offset account is subtracted from your mortgage when your interest is calculated.
For example, if you have a $200,000 mortgage and $25,000 in an offset account, you’ll only pay mortgage interest on $175,000. If you're on a rate of 2.5% for instance, you would save $19,000 in interest and would repay your mortgage 2 years early!
If You Can Afford it, Overpay
The most simple method for paying off your mortgage faster is to overpay. If you can afford to do this, it would require a) choosing to increase your monthly repayments or, b) paying a lump sum. You'll need to check your paperwork to figure how much you're allowed to overpay; but doing so would mean you save money on interest. If this is a feasible move for you, we recommend talking to a trusted broker or financial adviser.