Melanie Wegener
A mortgage doesn’t have to be forever. In fact, many people pay theirs off early. In recent times with the cost of living and interest rates sky rocketing, this might seem out of reach.
For some people, it might be. For others, there might be some ways to pay down the mortgage earlier than expected. It takes intentionality and sacrifice. Just imagine what your life would look life if you had no debt, and true financial freedom!
Here are 20 tips to help pay off your mortgage faster:
1. Negotiate a better interest rate
Check to see that you are on a good interest rate. Banks are like electricity companies. They apply the lazy tax. They offer good deals to new customers but often not to existing ones. Look around at their competitors and see what they can offer you instead. Go back to your bank and say that you’ll move if they don’t match the other rate. In many cases, they’ll do anything to keep you.
2. Make more frequent repayments
Pay weekly or fortnightly repayments instead of monthly. I prefer weekly as it feels like less money, and I like to see results quickly. Paying weekly or fortnightly means that you make an extra payment each year without even realising, and this will save you thousands in interest.
3. Round up
Round up accounts each night or whenever you check your balance. Transfer to the mortgage. Small amounts quickly add up.
4. Need vs Want
Do you need to live close to the city, in a large house, with a swimming pool? Opt to buy a home in an area you can afford. Ideally buy with what you could afford on one income if necessary. You could lose your job, get sick, injured or pregnant You can always upgrade later. Live within your means. In saying that though, before you buy a house, consider the next 5 years. If you want to start a family, perhaps don’t buy a one bedroom apartment. Avoid moving more than you need to or you’ll just end up paying stamp duty unnecessarily.
5. Get insurance
Make sure you (and your spouse) are covered in the unlikely event of permanent disability, loss of income and death. It is important that the stay at home parent is also covered, so if something happened to them, the partner could pay off the mortgage and be able to stay home with the kids without worrying about money or work. Often superannuation policies cover for this but it may not be enough, or they may not cover for pre existing medical conditions. Insurance is one of those things that you will probably pay for and never use, but this is a good thing.
6. Transfer payments
Transfer any Centrelink or government assistance payments that you can live without to the mortgage. This might be regular or annual amounts. It can be wise to wait until the end of the financial year to make sure that you have estimated your income correctly. Rather than risking a tax bill, you might get a lump sum payout. Some or all could be put towards the mortgage, depending on your other financial goals.
7. Live on one wage
If you are on a double income, see if you can live on one wage (good preparation for having children). Have one persons wage pay the rent or mortgage, groceries, bills etc and the other put all or most on the mortgage (or savings to buy a house). Knock as much as you can off, as quickly as you can.
8. Side hustle
Side hustles are a brilliant way of making some extra money. Sometimes a hobby can become a hustle. Any extra money from side hustles you can put on the mortgage. It is motivating when you see the amount owing on your mortgage going down.
9. Reduce unnecessary spending
Write down every person you buy presents for. It really does add up. Do you need to buy everyone a present at Christmas or can you do Kris Kringle? Put some limits in place, for example $30 adults for KK and $10-20 for kids. It’s worth a conversation before Christmas comes around.
10. Bring your own food
Pack your lunch. Bring a coffee to work rather than buying one. Don’t drink calories if you can avoid it. They are expensive and often don’t fill you up. Opt for a filling meal instead and drink water.
11. Spend your own money
Avoid using credit cards or Buy Now Pay Later schemes. Live within your means. Use cash and debit cards instead, and keep a list in your phone of things you want to buy. Wait a few weeks and see if you still really want them.
12. Refinance
Ask your bank if they can do a better deal. Consider seeing a mortgage broker. Check that your mortgage is with the best bank for you. If refinancing, you don’t have to sign up for another 30 years. This can be costly and extend the time that you are paying back the loan.
13. Seek advice
Consider paying to see a financial planner or advisor. It might set you back a couple of hundred dollars but will save you thousands over the long haul. You might be eligible to speak to a free financial counsellor.
14. Learn from the experts
There are many fabulous authors out there. I’d recommend Canna Campbell’s Mindful Money, Scott Pape’s Barefoot Investor and Lacey Filipich’s Money School. Read, watch YouTube clips or join one of their Facebook groups for inspiration and accountability. Podcasts are a great way to learn more and achieve your financial goals.
15. Budget
Make a budget and try and stick to it. There are plenty of apps and spreadsheets for this, some that are free and others that cost a few dollars. WeMoney is free and you get $5 for signing up (I receive a $5 referral). Others prefer a book and pen. Do your research and find what works best for you and your family.
16. Cash
Use cash where possible – it’s harder to spend than a card. It seems to feel more real and hurts when you spend. When using a card, use savings or debit. Credit cards can be a dangerous way to get into debt.
17. If you can’t afford it, don’t buy it
If you can’t afford a new or newer car, don’t! Save up and buy with cash. Opt for older (but still reliable). When you can afford it, upgrade. We have a fortnightly direct debit into a savings account for this very purpose. When we need to upgrade, we can use these funds to partly or fully pay for it.
18. Pause unnecessary spending
Consider putting a hold on luxuries like eating out, drinking alcohol regularly, overseas holidays and even private school fees until you have paid off your debts, and possibly even your mortgage (or at least make a dent in it).
19. Be on the same page
Try to get your spouse on board too. Watching your mortgage go down can actually be fun! It definitely makes it easier if you are both on the same page.
20. Do whatever it takes.
The more you can pay down your mortgage now, the less interest you’ll end up paying. Just because you signed up for a 30 year loan doesn’t mean it has to take that long. Do you want to still be paying it off in your fifties or sixties? Make a plan to pay it off early, if you can. Every little extra you can spare will save you thousands in interest over the life of the loan.
Paying off a mortgage early takes intentionality, hard work and sacrifice. It is a hard slog. I have never met someone who regretted paying it off though. The freedom that it brings is life changing. We are working towards getting ours gone.
Are you motivated to pay off your mortgage quickly? What strategies do you use? I’d love to hear below.
[Disclaimer: I’m not trained in finance so don’t take it from me. Feel free to grab ideas from this post but always see a professional for advice that is relevant and personal to your situation.]
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