Switch off the autopilot with these top 10 mortgage hacks
Senior Mortgage and Finance Consultant at Cocalex Consulting, John Maxwell gives property buyers his top 10 ways of paying off a mortgage sooner.
While most of us would like to pay off our mortgage before the end of the loan term, a surprising few proactively engage in trying to make this happen. We tend to go on autopilot paying a monthly amount but don’t consider what else we could be doing to improve our situation. Senior Mortgage and Finance Consultant at Cocolex Consulting, John Maxwell believes property owners should seek out every opportunity to ‘hack’ away at their mortgage. Here are his top practical tips to do just that:
- Keep your savings on your mortgage.John says he is ‘astounded’ at how many families still have one or more savings accounts whilst also paying a mortgage. ‘Why pay tax on interest earned from these accounts (even if it’s only a small amount) when you could be offsetting a higher interest cost of your mortgage?’ he asks.
- Consolidate your personal finance into your home loan.Provided you have accrued sufficient equity within your home, you can greatly improve your cash-flow position by consolidating your car loan, personal loan and credit card/ store card debt into one easy low repayment on your home loan. According to John, benefits include paying interest at the lower home loan rate and a lower repayment commitment due to an extended term loan.
- Use a budget.There are many apps available to track your income and expenses and keep you informed of your spending (and savings) habits. ‘Only when you can see your money position can you be responsible for the desired outcome,’ John advises.
- Put your income/s in your offset-account.Whilst your income is resting in the offset account or directly on the (flexible) loan you are saving interest every day. This is because interest is charged monthly BUT calculated daily. Even if you must spend the majority of the income by month’s end, you can still pay your mortgage off in half the time or sooner!
- Every winner needs a coach. Many brokers or finance consultants don’t charge for their services, however, there is only a small percentage who are categorised as money coaches. You need to seek one out and have them on your team.
- Review your financial position regularly. John believes you should ‘know your numbers − if you don’t like numbers, your partner often does. SUPER HACK: Automating your bill payments will make life easier. Preferably set this up within your internet banking so you have the flexibility to stop a payment or make a prior arrangement with any billers if necessary.
- Review your costs periodically. Once you know where you are at, how much you are spending and saving, it’s easy to compare and get a better deal on your mobile phone, utilities and other regular expenses. John also suggests you eliminate any costs which are unnecessary.
- Pay yourself first.If you, like many Australian families are struggling to meet your financial commitments every month, or your expenses fluctuate from month to month, pay yourself 10% of your income before you pay anything else. Simply increase your minimum repayment by at least 10%. This creates forced savings as well as some interest cost savings.
- Pay your mortgage more frequently.Rather than monthly, change your repayments to at least fortnightly and if possible pay extra by rounding out your repayment amount, i.e. if your fortnightly repayment is $1383, round it up to $1400 or $1500 fortnightly.
- Maintain the best mortgage for you.At least every 2−3 years you should review your mortgage as what was competitive 5−8 years ago may be ‘way off the money’ today. Ensure you review:
- loan structure
- fees and charges
- features and flexibility
- interest rate
- your situation – you may be entitled to additional discounts or benefits.
‘The difference in many instances is as much as 1% higher than the current competitive lenders,’ says John.
Reproduced and edited with permission – Top 10 Mortgage Hacks by John Maxwell