Paying off your mortgage – whether for a luxury apartment or a villa – will be one of the largest investments and debts you will carry through a lengthy part of your life. Throughout that time you will experience turbulence in the property market, meaning the faster you pay off your mortgage the better position you will be in financially.
To help you make better financial decisions regarding your mortgage, we will look at three ways you can pay off your mortgage faster, freeing you from debt and giving you the financial security you need when you retire or need it most:
Make Big Sacrifices
Choosing to make big sacrifices will hugely benefit your mortgage payments in the long run, as they will help you to put larger sums of money towards paying it off. By choosing to have a staycation for a few years in a row instead of splurging on yearly vacations to Italy, Florida or Dubai, choose to save the money you intended to spend while you were there and put it towards your mortgage instead. You can do this by saving the intended amount you would have needed for your vacation and adding it to your monthly mortgage payments instead. You do not need to change your interest rate to do this. Another big sacrifice you and your partner could make is to have a smaller wedding and skip your honeymoon. Although it sounds drastic, by cutting down your guest list by half and opting to use the other half of the money combined with the money you would have spent on your honeymoon, you could build up a significant amount of money to go towards your down payment or have the option to contribute more money to your monthly repayments if you have already gone through the initial process.
Make an Extra Payment Every Year
This change doesn’t require you to contact your bank or change your loan, it is a personal choice that can be made if and when you can afford it. Choosing to make an extra payment each year will make a difference to your mortgage and will take years off your payments, meaning that you will save money in the long run. You can choose to save some money that you would normally spend on luxury items or experiences (referring to the first point about making big sacrifices) each month until the end of the year, calculating the amount in order for it to add up to a full month’s payment, and put it towards a 13th month payment. Alternatively, if you and your partner receive a bonus or 13th cheque at the end of the year, you can take your 13th payment amount out of that money instead of saving up throughout the year. You can contact your bank if you would like to see how much time and money you could be saving by paying forward a 13th cheque to give you the motivation to make the decision and see it through.
Think About Downsizing
For those homeowners who have owned their home for give or take ten years, and now have children who have grown up and left the nest or for those families who feel like they have invested in a home that is too big for them, downsizing is a great option to think about. By selling your larger home for a profit, you will then be able to buy a small, less expensive home that could help you be rid of a mortgage altogether – or lessen your mortgage a significant amount. Even if you end up reducing your mortgage by a significant amount by downsizing, it means that you have still succeeded in minimising the amount of money you have left to pay back, reducing your debt. You can then use the two steps about to start paying off the rest of your mortgage balance quickly and successfully. If you are thinking about downsizing, but think it might be too drastic a move for you and your family, you should consider downsizing by one room. For example, if you live in a four bedroom house where only three of the rooms are occupied on a daily basis, you could downsize to a three bedroom home instead. You will be surprises at how much money you could reduce your mortgage by, by doing just that, as – depending on the area – a three bedroom house could cost significantly less than a four bedroom home.
You will undoubtedly benefit financially by speeding up the rate in which you pay off your mortgage, regardless of whether you use one or all three of the suggestions given in this article. It is not a decision that you or other home owners need to make now, but the sooner you make the decision the more money you will be saving in the long run and the faster your mortgage will be paid off.
