Everyone knows that paying off your home loan as quickly as possible will save you money in the long term. Depending on your income and expenses, the time it takes to pay off your loan can vary significantly. Here are some ideas for how you can speed up your mortgage payments and save on interest along the way.
1. Create a budget
Working out a budget involves tracking all of your inflows and outflows. Then, go over your transactions with a fine-toothed comb. Do you need all of those subscription services? Can you negotiate some of your regular bills or switch to a cheaper provider? Talk to friends and family about ways that they save on monthly expenses. Then, allocate a maximum amount of money you can spend on each category. For example, you might allocate $400 a month for groceries. This is what budgeting is all about. It’s about taking control of where your money is going!
2. Make a financial plan
The BT Australian Financial Health Index in 2013 found that 33% of Aussies live from one payday to the next.
To achieve the goal of paying off your loan faster, aim to detach yourself from the reliance on each payday.
Create a plan that involves spending money this month that you earned last month (not last week). Slowly but surely, try to extend the time between money coming in and money coming out.
Also, plan to build up your emergency savings fund. Try to save up to 6 months of your expenses. That way, if something unexpected happens like an injury or a job loss, you’ll be able to survive financially while working through those things without missing repayments on your home loan.
3. Kill your debt
If you’ve got a big car loan, HECS debt or credit cards you can’t pay off, these things are holding you back from living a mortgage-free life.
Before you can think about building wealth or equity in your home, you need to eliminate the debts that are charging the most interest on a monthly basis. Generally, liabilities like credit cards and personal loans will have much higher interest rates than your home loan. So you can look at debt consolidation options to bring all of your debt under one cheaper debt facility. Talk to us today about how you can consolidate your debt and how to make a long-term financial plan.