New Years Resolution - Pay off your mortgage faster
5 tips to pay off your mortgage faster
December 30, 2008 // Franchising.com // As the countdown to 2009 begins, specialist lender, RAMS Home Loans today revealed five tips to help Australians meet one of the most popular New Year's Resolutions – paying off your mortgage faster.
RAMS CEO, Melos Sulicich said as the mortgage is often the biggest monthly expense for many families, it's worth exploring the many options to pay off your mortgage faster.
"Once the New Year celebrations have wound down, traditionally many people turn their attention to their finances and how they can save money on their mortgage," Mr Sulicich said.
"Recently, there has been some welcome relief in interest rates, with most lenders passing on significant interest rate reductions, including RAMS who has reduced its standard variable rate by 2.85% p.a. over the last few months of 2008 – (from September to December 2008).
"This has saved approximately $598 per month on the average home loan of $300 000 over 30 years. If possible, by using these savings from reduced interest rates to make higher than required home loan repayments, you will pay off a mortgage sooner. For example, you could save about $204,000 or 13 years and 9 months over the life of the loan by continuing to repay your mortgage at the higher interest rates," he said.
To help get Australians off to a great 2009, RAMS recommends considering the following 5 simple tips to repay your mortgage faster:
- Make more frequent, regular repayments i.e. make weekly or fortnightly repayments instead of monthly as interest is generally accrued daily and charged on a monthly basis. This could save about $100 000 and 6 years and 4 months off the average $300 000 home loan over a 30 year term.
- Make extra lump sum repayments. Consider saving loose change and cutting back on buying your lunch or coffees. As little as $25 extra a week to repayments will reduce the average $300 000 home loan over 30 years by 4 years and 9 months, saving $77 000 in repayments.
- Watch your fees as redraw and account keeping fees will add extra to your loan repayment. Some home loan products, such as the RAMS Rate Relief Home Loan charges no account keeping fees for the life of the loan.
- Consider refinancing to a more competitive and cheaper interest rate. While most lenders charge break fees and other costs, such as early repayment fees for switching loans, it pays to do your homework as lenders offering cheaper interest rates, reduced and/or no fees and charges may provide greater savings over the life of the loan and outweigh any initial fee.
- When taking out a new home loan, look out for promotional offers such as no application fees as this can save hundreds of dollars off the application process.