Are you in ‘planning mode’ and feeling the wind of change blowing in your direction? The new year can be a great opportunity for a new approach to your mortgage debt. So, here are some key steps you can take in 2023.
Pay a little extra (if you can afford it)
Any extra money you pay towards your mortgage helps you reduce the mortgage faster, and saves you money in overall interest.
Of course, rising interest rates have made this step more difficult than it was in past years. But if you can afford to make a lump-sum payment or increase your mortgage repayments, it usually makes good financial sense. Just keep in mind that, if you’re on a fixed-rate mortgage, there’s usually a limit to how much extra you can pay without incurring penalties, whereas with a floating interest rate you can pay as much as you wish with no penalties.
Even a small amount can make a big difference down the line. According to Sorted’s mortgage calculator, a $500,000 mortgage at 6 per cent interest over 25 years will cost you about $743 a week in principal and interest payments, and include $465,653 in interest costs. If you increase your payments by $40 a week, you can repay the mortgage in 23 years and reduce your interest bill by over $50,000 over the life of the mortgage.
Understand your structure
If you’ve got one big chunk fixed on principal and interest over 30 years, you might want to resolve to think about other options.
There’s no one-size-fits-all for home loan structures, as it all depends on your circumstances. One popular structure, for example, is to split a loan up into smaller amounts, which can be fixed for different terms and spread out your exposure to different interest rates and interest rate rises when the fixed rate term expires. Plus, property investors may want to choose to structure their mortgages so that they can repay the principal on their owner-occupied home more quickly than their investment property.
Whatever you choose to do, the goal is to pay off your mortgage faster and reduce the overall interest you pay over time. We can help you find the right fit for your situation.
Set a review reminder
As this year has shown, a lot can change in just a few months. So, it’s a good idea to set a reminder to check in with your mortgage, every six months or year, to ensure you’re still on track for your goals.
Even small tweaks can have a big impact and shave years (and dollars) off your home loan. The key thing is to stay on top of it, and we can help you do just that.
Need a hand?
As always, we are here to help and would love to get you on the right path for 2023. Please don’t hesitate to contact us if you have any questions.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.