We have just brought our first home!!! Do you have any tips on how to pay off a mortgage fast?
Tips before paying extra into your mortgage:
– Consider putting extra payments into an offset.
This will save you the same amount of interest but you maintain more control (bank can’t stop you withdrawing unlike in a redraw account).
It also means that if years down the track of you decide to rent your home out (perhaps when upgrading) you can tax deduct the interest payments on the loan you have left. If you’ve paid it down you cannot withdraw and tax deduct
– Consider opportunity cost. Your mortgage repayments will reduce in real terms (%of income) due to inflation so will not seem such a burden in 15 years. With interest rates at record lows, make sure you consider investing with your extra cash flow vs extra mortgage repayments
Regardless, you should aim to minimise debt to save interest
– Pay fortnightly instead monthly
– use an offset to store savings for other goals
– salary sacrifice into mortgage (saving on tax)
– pay a bit extra from the start (most powerful effect on total interest paid) perhaps pay as if interest rates were 1-2% higher as a buffer in case of rate changes
– if self employed consider timing income and tax deductible spending to optimise tax and keep money in your offset as long as possible
-when interest rates drop keep your payments the same
– with each payrise put some of the extra into your mortgage each pay
It always feels like slow progress to start, but you get the first 1/3 paid off soooo slowly it really starts to accelerate