How to reduce the time it takes to be mortgage-free?

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How to reduce the time it takes to be mortgage-free?

For the majority of New Zealanders that purchase a home, their mortgage will be the biggest and longest-term debt they will hold throughout their lives, and many will have a mortgage through into retirement years.

There are a few ways in which you can try to reduce the time it takes to get to your debt-free date on your mortgage; some are simple that can be implemented right away, and others require a little more thought and guidance through personalised financial advice.  In this post, we will touch on one-simple way that you can implement right away; and then another that would require further action from you.

Increase your repayments

It may seem like a common-sense approach, but many people we see are still repaying the minimum repayments required on their loan without any progress on reducing their mortgage-free date since they first took on the loan.  In some cases, this date may have been extended out, by topping up / increasing the home loan with a new 30-year term on the increased lending.

Round up your repayments

Even the slightest rounding up of repayments can have a real impact on repaying your mortgage off faster.

Let’s look at an example.  The repayment on a home loan of $500,000 with a rate of 4.5% over a 30-year term, is approximately $1,169 per fortnight.  If we round up the repayments by $31 per fortnight and make the repayments $1,200, it will cut approximately 1-year and 6-months off the 30-year loan term.  This will save approximately $25,166 in interest.

Got a spare $10?

The larger the increase in repayment, the more time that will be cut off the existing loan term.  Making larger home loan repayments will not always be possible for everyone.  This may be the case in a rising interest rate environment and especially at a time when the cost of living has increased.  However, even an increase of $10 per fortnight would cut 6-months off the term of the loan in the above example, which shows that every small amount of rounding up in repayments can help.

Check out our handy repayment calculator.  Paying more than your minimum repayment will save interest in the long run.  See how much you can save.

https://connectmemortgages.co.nz/repayments-calculator/

Make the best use of your money

Often people will have a basic loan structure that was put in place for them when they first took out their home loan.  And they may not have had this reviewed other than rolling over to a new fixed rate at the end of the fixed term.

You may have had some recent life events, or you are about to embark on new challenges or changes that may require you to adjust how your loan is structured.

There are several loan products in the market that can assist you in making the very best use of every cent you have to reduce the daily interest the bank is calculating on your mortgage.  Not all banks have all of these products, and the rates and fees associated with these products can vary between providers.

Restructuring your home loan may require a little input from a suitably qualified Mortgage Adviser.  Your Connect Me Mortgages Adviser can complete a 30-minute financial mortgage health check with you.  This check is a free review of your current mortgage.

Our Advisers can provide independent financial advice with recommendations on how you may be able to restructure your mortgage to assist you in getting mortgage-free faster.

If you have a great setup already, we will be quick to congratulate you on getting this right.

Lending criteria are always subject to change.  The information contained in this blog is not tailored mortgage advice; please contact a Connect Me Mortgages Adviser to get tailored mortgage advice for your own financial position.