If you were to poll financial planners in Perth about the single best thing average homeowners can do to improve their finances, the answer would be: To pay off the home loans on their Perth properties early. For those on a tight budget, this appears to be anywhere from difficult to impossible.
Luckily, there are steps that most homeowners can take to make it possible to pay off their home loans earlier than they may think is possible.
Most of your interest is loaded into the front end of your loan. The sooner you get your principal down, the less money will go to interest. Even a few extra dollars now make a big difference later.
Pay Off Your Credit Cards and Car Loans First
Credit cards and car loans are always at higher interest rates than your home loan. Pay off your highest interest loan first–and continue. You will want to keep at least one credit card for emergencies but pay the balance monthly.
Pay More Money More Often
We know this sounds overly simple. In a way, it is. But there are ways to save incredible amounts of money and it doesn’t cost as much as you may think. For example, if you take out a home loan for $300,000 for 30 years, at 7.15% interest rate, you will pay over $420,000 in interest.
If you can find an extra $50 per month to pay, you will save over $39,000 and the mortgage will be paid off 28 months early.
Get a Flexible Mortgage
Paying off a mortgage early is the backbone of many debt and retirement strategies. Make sure that your mortgage gives you that flexibility.
Leverage Your Assets with the Right Credit Product
The mortgage market is fluid and always changing. The loan that was right for you five years ago might not be the loan that is right for you now. You can literally save thousands of dollars with the right mortgage and lose the same amount with a mortgage that no longer fits your financial outlook.
The bottom line
You need to contact an MFAA-approved mortgage broker, such as Purely Finance. Call (08) 9472 9766 to learn how to pay off your mortgage early.