Buy your home for less

Aug 25, 2016 10:26:44 AM

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Some tips for trimming the cost of your mortgage by our mortgage advice partners Mortgage Express

As a homeowner, paying off your mortgage before you retire is important. Once you hit retirement age, the last thing you want is to be saddled with debt, or to have to continue working to pay off the balance of your mortgage. Here are some ways to help you reduce your total mortgage and help you buy your home for less.

Shorten your mortgage term

Reducing your mortgage term to 20, 15, even 10 years shaves thousands of dollars in interest off your total mortgage. Even reducing your mortgage term by one year can save you.

For example, if you borrow $750,000 at 5.65 per cent interest over 30 years, your interest over that time on a principal and interest loan amounts to $808,537. Shorten your mortgage term to 25 years and you reduce your total interest to $651,925, saving yourself a whopping $156,612.

It does mean your mortgage repayments every month will increase, so it’s important you work through your budget to determine whether or not this option works for you.

Make additional payments

If you’re unable to commit to shortening your mortgage period, keeping a portion of your mortgage on a floating rate or having a revolving credit mortgage may be the answer.

A revolving credit mortgage works much like a large overdraft. By combining your daily bank transactions and your home loan account into one, and having your income paid directly into this account, you keep your mortgage balance as low as possible and pay less interest, effectively reducing your mortgage term.

You’re also able to make lump sum payments whenever you have any extra funds, but you can withdraw the money any time you need it. It may even encourage you to cut back on unnecessary spending and channel those savings into your mortgage.

Pay fortnightly instead of monthly

By making mortgage repayments every fortnight instead of once a month, you effectively make an extra month’s payment; so 13 repayments instead of 12. That way you reduce the length of time it takes you to pay off your mortgage, and the total amount of interest you’ll pay over the term of your mortgage.

Look out for refinancing deals

Keep an eye on the interest rate and consider refinancing if a better deal comes along. Look for refinancing offers with more flexibility or a better interest rate. Be sure to factor in any costs for refinancing when considering this option.

It’s worthwhile reviewing your mortgage on an annual basis to ensure you’re getting the best deal available to you. Your mortgage specialist can help with a financial health check, go over your finances and help you find any savings.

If interest rates do drop, keep up your repayments at your current level, rather than be tempted to spend the savings. By doing this, you’ll shave off a substantial portion of your loan principal.

Be prepared to negotiate

Given the current global credit situation, negotiating on interest rates, terms and fees may seem impossible. But if you are in a good position to negotiate, you may be able to save yourself thousands of dollars.

It’s worthwhile shopping around both banks and non-bank lenders to compare mortgage deals.  Get in touch with Mortgage Express and talk to one of our mortgage specialists if you need advice or help with negotiating your mortgage package.

Let us help you

Planning ahead for your future retirement and ensuring you’re on track to pay off your mortgage on time may seem challenging. If you’d like advice on how you can buy your home for less and pay off your mortgage sooner, get in touch with a Mortgage Express mortgage professional.

www.mortgage-express.co.nz

Topics: Buying, Finance