A new year can bring a fresh new start. If paying off your mortgage faster is on your wish list for the coming months and beyond, why not make 2019 the year you kick things into high gear?
New Year's checklist to pay off your home loan faster
Published: December 2018
Paying more and more often is the way to go, and you can achieve this in a sustainable way. Check out our tips to start off on the right foot:
How much are you currently spending and how are you spending it? What debt do you currently hold? How much do you have in savings?
Money comes and money goes, so having an eagle’s eye view of your finances isn’t always easy. But as complicated as it can be, tracking where your money is actually going will help you make changes, find new ways to save and potentially hasten the day that you can wave your mortgage goodbye.
A quick web search will turn up a number of budgeting planners, but if you are after something easy to use, Sorted's Budgeting Tool is a good place to start.
Paying off your home loan faster is all about reducing costs: the shorter the life of your mortgage, the less interest you'll pay over the years. And one way to achieve this is to review your home-loan structure.
Has anything important changed in your life? If so, your mortgage may no longer be aligned with your needs and it might be time to restructure it.
By restructuring your home loan, you can:
- Unlock equity and restructure to a lower interest rate
- Fix all or part of your mortgage, or re-fix your home loan before it switches to variable
- Use revolving credit
- Increase your repayments
We enjoy helping everyday New Zealanders make their home ownership dream a reality – especially when buying a home had seemed out of reach. And we strive to ensure that, whenever our clients' circumstances improve, their financial health can improve, too.
For example, you may have secured a Specialist product with us because of a credit issue at the time of application, or because you needed to repay short-term or IRD debt. At RESIMAC, we understand that a 'specialist' interest rate is not forever, and will always work with your to improve the interest rate you're on.
If the event that put you into Specialist is no longer evident (for example, a better credit report is available or you can prove a good consistency of debt repayments), please let us know right away: we could offer you a Prime product.
As you know, if you lend with us on a Specialist variable rate and pay your home loan on time, we will automatically drop your interest rate at the end of 12 months. This opens up an opportunity to pay off your mortgage faster. By keeping the same repayment levels, you will pay more of the principal and reduce the term of your mortgage significantly.
Remember, if you're on a variable home loan product, there's no penalty for making one-off or regular extra repayments with RESIMAC, if you switch to weekly, monthly or fortnightly. Which brings us to the next point...
Even small changes to your payment schedule can have a big impact in the long turn. So this year, if you’re paying monthly, consider switching to weekly or fortnightly repayments. As there are 26 fortnights rather than 24, by choosing a fortnightly schedule you will pay an extra month every year.
Alternatively, if your budget allows, you can decide to make an extra repayment each quarter (or four extra repayments a year): depending on your loan term, this could help wipe eight-to-ten years off your mortgage.
Who knows what 2019 has in store for you? If it’s a pay rise or a bonus, and you are on a variable interest rate, consider diverting the additional income to your mortgage. It can be an effective method of paying off the mortgage faster.
Do you get by with a little help from your friends? There’s a big psychological component to managing money, and talking to someone about it can always help you put things into perspective. Some of your friends and family may have been there before, and could tell you all about the creative ways they have found to get mortgage-free faster.
How long has it been since you last discussed your mortgage needs? Even if it's just been a year or two, a lot may have happened in your life since then.
Remember: our Team at RESIMAC Direct are here to guide you along the entire home-loan journey, answering each and every questions you may have. We look forward to meeting you in the new year, to make sure your mortgage is still the best one for your needs.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of RESIMAC Direct. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from a mortgage or finance professional before implementing changes relating to your finances.
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