How to Pay Off Your Mortgage Faster – Tips and Advice
Are you thinking of learning how to pay off your mortgage faster? Is the idea of getting out of debt sooner rather than later beckoning to you? If you answered yes to these questions, then read on!
Did you know that for the average homeowner in Queensland, it takes 25–30 years to pay off a home loan? While that may seem like a long time, it’s substantially faster than some other states (sorry, New South Wales!), and this is according to a study by HtAG Analytics. While 30 years can sound like a massive commitment, that should not be a reason to hold off on buying a home. With the right approach, you can learn how to pay off your mortgage faster.
Why You Should Consider How to Pay Off Your Mortgage Faster
Why should you be thinking about how to pay off your mortgage quicker? For starters, learning how to pay off a mortgage in 10 years (or even 20 years) can potentially save you hundreds of thousands of dollars over the life of the loan. How can you do this? It all comes down to interest.
Many people look at longer loan terms as a way to save money, because the longer your loan term, the lower your monthly repayments. While this might seem like a good thing, remember that interest is charged on every monthly repayment. For a 30-year loan, that works out to be 360 repayments (or 360 times you’ll be charged interest). For a 20-year loan, this drops to 240 repayments, meaning you’d save yourself 120 interest charges.
How to Pay Your Mortgage Off Quicker: 4 Expert Tips
Can you really learn how to pay off your mortgage in 10 years? Yes, you can. With the right approach, you may even consider learning how to pay off your mortgage in 7 years! Here are our top tips for how to pay off your mortgage faster:
1. Consider Fortnightly Repayments
When considering how to pay off your mortgage faster, it’s a great idea to try fortnightly repayments. With this method, you divide your monthly repayments in half and have this amount taken out on a fortnightly basis. How will this help? Well, fortnightly payments will result in you making the equivalent of 13 full payments per year. Over time, this extra payment can accelerate the reduction of your loan balance and help you pay off your mortgage faster.
2. Increase Your Repayments
If you’re seriously interested in how to pay your mortgage off quicker, see if you can increase your repayments. These additional funds may not seem like much, but they can literally cut years off your loan term.
For example, with a $450,000 loan and a 6.7% interest rate, paying an extra $250 per month could reduce your loan term by 6.1 years! However, make sure you check with your lender before making additional repayments, since some will charge you a fee every time you do this. If you want to make extra repayments and your lender insists on charging you a fee, ask a mortgage broker for help.
3. Request A Lower Interest Rate
If you want to know how to pay off a mortgage in 7 years (or 10, 20 years, etc.), you need to be wary of “loyalty tax”. This refers to the higher rates existing customers are often charged compared to new customers. A simple way to overcome this is by contacting your lender and asking for a better rate. If they’re unwilling to negotiate, it could be worth refinancing to a different lender.
Even 1% can make a significant difference over the life of a loan. A $450,000 loan with a 7.1% interest rate will cost you $3,024 per month. A 6.1% interest rate would reduce this to $2,727. If you continued to pay the same amount per month ($3,024) with the lower interest rate, you’d pay your mortgage off 6.8 years faster.
4. Make the Most of Added Payments and Bonuses
Whenever you receive unexpected income (such as tax refunds or work bonuses), consider allocating these funds towards your mortgage. Making periodic lump-sum payments can go a long way towards reducing the principal amount of your loan and, consequently, the amount of interest you’ll end up paying overall. This approach should definitely be considered when planning how to pay your mortgage off quicker.
How to Pay Off a Mortgage In 10 Years
If you really want to know how to pay off a mortgage in 10 years, consider a hypothetical example:
Alex had a $450,000 mortgage, a 7.1% interest rate and dreams of paying off the loan in 10 years. Alex researched how to pay off a mortgage in 10 years and decided to make some changes. They eliminated the “loyalty tax” by refinancing to a 6.1% interest rate and then committed to increasing monthly repayments by an added $560.
Strategic negotiations and periodic lump-sum payments from bonuses and tax refunds significantly reduced the principal. Five years in, Alex has slashed the remaining loan to around $313,000, paving the way for an estimated payoff in 10 years.
This example shows how a committed and informed approach can transform a 30-year commitment into paying off your mortgage in just 10 years.
Talk to a Broker About Learning How to Pay Your Mortgage Off Quicker
Want to learn more about how to pay your mortgage off quicker? Start by booking an appointment with a broker. At North Brisbane Home Loans, we can negotiate with your current lender or compare refinancing deals to ensure you get the best mortgage product to suit your needs. We can also discuss your long-term goals and provide additional tips on how to pay off a mortgage in 10 years.
Are you ready to find out how to pay off your mortgage faster? Book an appointment with the expert team of brokers at North Brisbane Home Loans today.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
