Do you like to dream about a time when your mortgage will be a distant memory? It could be sooner than you think. Provided you’re willing to put in the hard yards, there are a few simple ways to save money and pay off your loan ahead of time.
– Create a really good budget
There are budgeting tools available that can help you to plan your household expenses and look for ways to save more. The most important thing is to remember all of your expenses. If you forget about your car registration because it only comes in once a year, your budget might be thrown into disarray.
When you first put together your budget, try using bank statements or online banking records, as well as any paper receipts in order to account for every household expense.
Don’t forget to leave some room in the budget in case you need something unexpected – like medicine, a new work outfit, or maybe an anniversary present for your partner. (Although, if this one is unexpected you should give yourself a slap on the hand!)
– Consider an offset account for your savings
If you’re trying to save as much as possible and get your mortgage down sooner, you can’t go past an offset account. The idea here is that you can deposit your money into the account, it’s linked with your mortgage but you can access it whenever you want.
When your lender calculates the interest on your loan, they will only charge you for what you owe minus your savings. This can save you a lot of money over the life of your loan and allow you to pay it off sooner.
– Manage your expenses on a credit card – but be very careful.
If you’re fantastic with money, and I mean, really really responsible, it can be helpful to manage your household expenses on a credit card. By leaving your money in savings for longer, you could be earning interest, and with an offset account you could be saving interest on your loan.
This theory only works if you pay your credit card off in full at the end of each month.
The danger here is obvious, but if you have a lot of self-control it can be very helpful in managing your budget to run everything through a credit card. If you have a credit card with a good rewards program, you could even start to rack up quite a points balance.
– Align your mortgage repayments with your salary.
If you get paid fortnightly, it can make life a lot easier if you set up fortnightly repayments on your loan. This will help you to create a budget that makes sense to you – and is easier to stick to.
But try to give yourself a day or two between salary and mortgage payments, in case something goes wrong from your employer’s end.
Make the most of interest rate reductions by saving the extra money in an offset account, or making voluntary repayments against your loan.
It’s tempting to spend that extra money on fun stuff, but if you don’t mind being a bit boring then you will reap the rewards in the long term, and get your loan paid off sooner than planned.