How to own your home earlier

 One of the biggest financial commitments most of us will ever make is the mortgage on our home. So it is no surprise that the potential savings from adopting a smart mortgage repayment strategy can also be remarkable.

Take this example…

If you purchase a home for $500,000 with a mortgage of $350,000 repayable over 30 years, with an initial interest rate of 4.00% and monthly repayments, you would be paying $251,543 in interest over the period of the mortgage. In fact your first monthly mortgage repayment of $1,671 would be applied to interest of $1,167 and only $504 to repayment of the capital.

Although you have no control over the amount borrowed, you do have control over the interest you are paying.

1. Making fortnightly mortgage repayments of $836 (half the monthly payments) would save you almost $39,231 interest over the period of the loan, if all other factors remained the same.
2. Renegotiating your loan with an interest rate 0.2% less (80%) would save you around $14,437 over 30 years.
3. Increasing your monthly mortgage repayments by only $29 would reduce the term of the loan by twelve months and save around $9,349 in interest charges.

Or alternatively…

In a low interest rate environment, additional mortgage repayments will only achieve small savings in interest. Rather than make additional mortgage repayments, you could maintain existing repayments and invest excess funds in higher yielding assets such as shares. However, it is important to note that there is a higher level of risk involved in such investments.

One route that can be taken includes changing your payment schedule to fortnightly and planning to apply any increased income from tax savings or salary increases in the future to the mortgage, reducing the outstanding capital amount as soon as possible.

Ensure you speak with a professional before making any decisions regarding your home loan.