How to pay off your mortgage as quickly as possible

How to pay off your mortgage as quickly as possible

Did you know that the average age of people in NZ that get a mortgage is 34 years old? Considering that the usual mortgage length is 30 years, this brings you to the fine age of 64, 1 year short from retirement before having paid that off in full. The thought of this can be very daunting for many and you can be excused for putting this reality to the back of your head but the truth is that based on a standard Auckland retired couple, you will need to have more than half a million in saving.  Yes, you read that right, over $500,000 is required in savings if you wish to continue a similar lifestyle as the one you had before you retire.

There are 2 main types of loan structures that you can choose from and how you decide can have a big effect on how quickly you can become mortgage free.

Fixed Rate Mortgage

A fixed rate mortgage gives you an agreed rate for a fixed period of time. This means that you have a fixed amount to pay every month for the agreed time allowing you to have control over your budget.

Interest rates can fluctuate up and down over time, if the rate increases your payments will stay the same, likewise if the rates drop, unfortunately your payments will also stay the same.

Floating or Variable Mortgage

With a Floating or Variable rate mortgage the interest rate can increase or decrease at any time due to a change in the economic and market conditions. This means that your repayments will also fluctuate which may not work for those who like to follow a strict budget and like to know all of their outgoings.

A main benefit of a floating mortgage is that you can make lump sum payments at any time without incurring penalties. If you sell assets or have annual bonus’s you could put that onto your mortgage which will reduce the length of the loan, meaning you pay less interest and become mortgage free sooner.

What else can you do?

So, what are some of the other methods we can use to become mortgage free sooner

• Earn More:

Is it possible for you or your partner to work more hours? Put the increased earnings straight onto the mortgage rather than spending. You were living without it before, you can live without it now

• Spend Less:

Most of us enjoy a coffee or takeaway probably more often than we should. Do you really need it? Take a screen shot of your bank accounts for the past 4 weeks. When you break down your spending into categories (food, entertainment, bills) you may be surprised at just how much you spend on things that don’t make you any happier.

• Downsize your property as you get older:

Do you really still need a 4 bed/2 bath house? Relieve yourself from the pressure and upkeep of a large home once the kids have flown the coop and downsize to a more manageable property, reduce your loan or possibly pay it off in full.

• Invest what savings you may have:

There are a huge variety of investment options available to you. Do your homework and find one that best suits your interest and risk level.

• Lower interest rates:

Shop around for the best interest rate. The current rates are the lowest they have been in decades, taking advantage of this could shave years off your mortgage. Get in touch with your mortgage broker who will be able to assist you with this

• Pray for the winning numbers:

The sooner you pay off your mortgage, the less interest you pay, meaning you can put the money towards your retirement, holidays, investment property or helping the kids into their first home.

How ever you look at it, smart borrowers will actively review their mortgage structure regularly to ensure that they are getting the best value possible.

Get in touch with one of our Panda Mortgages accredited advisers who will help guide you on the right path to get you mortgage free as soon as possible.

www.pandamortgages.co.nz

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