Owning our own homes outright is a dream that many of us have. Imagine not having to make huge monthly payments – how much freedom could that give you? What else could you do with the money you saved? You could perhaps afford an earlier retirement, indulge in seeing the world or even help your children out with financial goals of their own. The earlier you manage to be mortgage-free, the more time you have to enjoy your money. But when a debt is considerable, making inroads into it can seem overwhelming. In fact, paying off your mortgage early is probably more achievable than you first thought, and can be a really great idea.
3 Easy Steps To Becoming Mortgage Free
Calculate How Much You’ll Save
Quite a few of us only have a hazy idea of what interest we’re paying on a mortgage means in real terms and in real dollars. A loan calculator can show you clearly what you are paying in interest over the entire term of your mortgage. Seeing the figures in black and white is quite an incentive to change. Especially when you think about everything else that you could be spending that money on. And if your current rate isn’t the best, make a strategy for the next time your mortgage comes up for renewal. One way to do that is using a specialist whole-of-market mortgage advisor to locate the best deals and letting them do the research to secure a lower rate for you. Even just a percentage can stack up to thousands over the term of the loan, so it’s worth taking your time to get it right.
Could You Downsize?
If you’re serious about making a lifestyle change and freeing up money to pursue other interests, you might want to consider if you could better achieve those goals by downsizing your home. Do you really need all the space that you have? Have your grown up children moved out or are likely to be doing so soon? In that position, you may find that taking the step of selling your home and opting for a smaller, more affordable property with a lesser mortgage that you can pay down quicker would be a great option. Or you could potentially, depending on your current home’s value, be in a position of being able to purchase your new home outright. Either way, you can be mortgage free a lot faster than if you stayed put.
Aim For Overpayments
Overpaying your mortgage is a brilliant way to make real inroads into the debt. It has a snowballing effect, as more and more of the payment amount goes towards your principal balance over time. Check your contract carefully to see if there are any early repayment penalties, as some lenders do insert these. Then work out the saving in interest, and depending on the deal you have, it might still be worth making extra payments even with those charges.
Again, if you are looking at a renewal of your mortgage anytime soon, compare not only interest rates but early repayment clauses. Switch to a deal that doesn’t penalize early repayment as soon as you possibly can. In the meantime, add extra into your savings that you can put down as a lump sum against the mortgage when you are able to.
Even small changes make a big difference – rounding up by an extra hundred may not seem huge, but it does have an impact over time. I personally add an extra hundred on every mortgage payment. It is an easy amount for me to swing and it has already saved me thousands of dollars and years off my mortgage.
I think a lot of people are resigned to having a mortgage for life because they don’t know all the facts. Becoming mortgage free is easier than you think. It starts by knowing your numbers and then making a plan. Make sure your retirement is all that you have dreamed of by getting rid of your mortgage and freeing up your money for the things you really want to do.