When you take out a mortgage, you set a term for this. Term refers to the period of time that it will take to pay off your mortgage. This is generally 20, 25 or 30 years but there are plenty of options and the choice is normally yours. The term that you choose will dictate your repayments.
There are other things you can do that will help you pay off your mortgage faster. Here are some suggestions:
- Making repayments that are higher than the required amount. Remember, this does not need to be hundreds of dollars every time. You can choose an amount that you might find comfortable. Consider giving up your daily coffee of $5 a day and this will give you an extra $50 to put in to your mortgage a fortnight. Small amounts can add up over time.
- Make repayments more frequently. Many mortgages are structured around monthly repayments so consider making your repayments every fortnight. This will put you 2 payments ahead every year and you won’t notice the difference.
- Get a better rate. The current interest rate level in Australia is at a record 50 year low. If there was ever a better time to get a better rate on your mortgage, it is now. Once you have a lower rate, you maintain your repayments and you pay off your mortgage faster. It’s that simple!
In most instances, your mortgage is your household’s single largest expense. To ensure you are getting the best deal and managing your finances well, you best bet is to be well informed. Make sure you know the fundamentals of your mortgage. These are:
- The term of your mortgage
- The rate of interest
- The repayment amount and frequency
- Whether the interest is fixed, variable or split
Being informed puts the knowledge in your hands. Remember, your mortgage broker is here to help you so be sure to check in with them regularly about your current lending to ensure you are getting the best deal.