Buying a house is among the few financial investments you will ever make. For many homeowners, this means taking on a mortgage loan that will typically be paid off from ten to thirty years.
Being in debt for thirty years is not a great prospect for many people, especially those who aim for financial freedom. Fortunately, there are steps you can take to pay off your mortgage loan much earlier. This saves you a lot of money when it comes to interest, and more importantly, this takes a big financial load off your shoulders.
Read on for tips on how you can shave several years off your mortgage term.
Increase Your Payments
A simple way to pay off your mortgage early is to increase your payments. When you have extra cash due to a tax refund or a salary bonus, you can opt for a lump-sum payment on your mortgage. Every cent of additional repayment goes to paying off the principal, which reduces the amount charged with interest. Even if you don’t refinance your loan after several years, the interest payment will still get smaller, and your loan term is significantly reduced.
Make sure to talk to your mortgage lender making these extra payments. Some lenders impose a fee for additional repayments, and others may limit the number or amount you can pay in advance. Keep an open line of communication with your lender, so you always have the best loan term for your financial situation.
Find Another Mortgage Lender
Some mortgage lenders don’t allow extra repayments for home loans. If you have a disagreeable lender, you can transfer your loan to another lender that offers loans with lower interest rates and other features that are more advantageous for you.
Shopping around for better loan rates or flexible repayment terms can also give you more negotiating power with your current lender. Make sure the benefits of your new lender outweigh the costs of transferring your loan.
Avoid Mortgage Marketing Schemes
First-time homebuyers may not be very familiar with the real estate and loan industries, so they are much more vulnerable to marketing schemes used by lenders to bring in as many customers as possible.
One example is an interest-only loan offered over a honeymoon period, usually lasting up to five years. This is a very attractive prospect because of the promise of very low payments for several months. However, once that honeymoon period is over, you start paying the principal and the interest. When you add everything up, it turns out that there are no significant savings at all, and you’re left paying more interest.
The best way to pay off your mortgage sooner is to pay off the principal and interest at once. These marketing schemes will only extend your loan term, keeping you far away from the financial freedom that you deserve.
A mortgage loan is a heavy burden to bear for twenty to thirty years. The tips enumerated above can help shorten your loan term to a more manageable period. But if you truly want to pay off your financial obligations at a faster rate, you should choose the right mortgage product and the best mortgage broker who will meet all of your needs.
If you’re looking for the best mortgage brokers in Sydney, Wealthy You is the perfect choice. Whether you’re a first-time homebuyer or a well-versed investor, our knowledgeable mortgage consultants offer the best possible mortgage rates, loan interest, and loan terms in the market. Contact us today!