Seven hacks to help you pay your mortgage off FAST

By Matthew Harris | April 3, 2020 | 8 Min read

There are roughly 1.9 million homes in New Zealand and only 630,000 (one third) of those are mortgage-free.

The fact is, most Kiwis homeowners have a mortgage their entire working lives – and many don’t even manage to pay off theirs before retirement.

Don’t make the same mistake. Improve your financial future by using these seven tips to pay your mortgage off faster.

1. Make fortnightly, not monthly, repayments
If your mortgage repayments are calculated on a monthly basis, you can pay your loan off faster by simply halving the monthly amount and paying fortnightly instead. Do this and you’ll end up making an extra month worth of repayments every year, which could shave years off your loan term and save you thousands of dollars in interest.

2. Make your first repayment on settlement date
Usually your first loan repayment will be made a month after settlement. Instead arrange to make your first repayment on the day of settlement so that you can reduce your loan principal before you’re charged a dollar of interest. That small change could save you almost as much as $2,000 in interest repayments over the life of your loan*, making it easier to pay off quickly.

3. Pay fees up front instead of adding them to your loan

Adding lenders mortgage insurance (LMI) and other bank fees to your loan may seem like a good idea at the time, but it’ll cost you thousands in interest down the track. In fact, capitalising an LMI of $10,000 could cost you over $7,000 over the life of your loan*. Do yourself a favour and pay those fees up front instead.

4. Set up an offset account

An offset account links a savings or similar account to your mortgage. Interest is then calculated based on the mortgage principal minus whatever amount is in the offset account. If you’ve got savings that you can spare, this is a great way to pay less interest and pay your loan off faster.

5. Keep your repayments the same when rates fall
Mortgage interest rates have been trending downward since 2016 and there’s a chance they’ll keep going. If the interest rate on your mortgage decreases, don’t decrease your repayments – instead keep them the same to pay your mortgage off faster.

6. Review your loan yearly
So many Kiwis stick with the same bank for the entire length of their home loans – their circumstances change but their mortgages never do. Don’t make the same mistake. Review your home loan yearly to ensure that it’s still suitable, and that you’re getting the best possible deal. You might be able to secure a lower interest rate or pay less fees.

7. Get help from a broker
Mortgage brokers offer expert home and investment loan advice to help ensure your loan is right for your unique circumstances. The good ones have longstanding relationships with banks which means they may be able to secure you a lower interest rate or even have some fees waived. Plus a good mortgage broker can help structure your mortgage better so that you can pay it off as quickly as possible.

*assuming a $500,000 loan with a 4% interest rate and 30 year term.

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