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No doubt you have seen all over socials people talking about “How To Pay Off Your Mortgage In Ten Years!”, and the like. The over-pay method certainly works for some, in some situations, but with inflation and interest rates still high, is now the best time to overpay on your loan? Possibly not. It is however the best time to prepare for when inflation and interest rates ease, so when you have the capacity to pay your mortgage off faster, you have the lever to pull.
Buyers who purchased property in the last few years experienced high purchase prices, which was painful to take, however they were insulated by low interest rates. This still allowed us to own property and still do all the fun ‘life’, things that we like so much! Like going out semi-often, having exciting packages of online shopping arrive at work regularly, and generally still enjoy day to day life…But then, the cost-of-living drama hits!
As the cost of living rose, and interest rates with it, reality kicked in. As Sir Cliff Richard sung, ‘I wish we’d all been ready’. Many assumed that costs would not go up as much as they did and pockets (and the fun life) were hit hard.
This begs the question - Could we have been better prepared? And knowing now what we know, how can we plan to absorb some of this pain, should it occur again?
A lot of us have been forced into making changes to our spending habits and have discovered them to be less painful than we thought. Think about some of the positive budget changes you have had to make that have not ended up being a big deal. Things like not having ALL the streaming services, switching to buying supermarket brand goods, or always ‘forgetting’ to take your wallet with you when you go out with mates…
The result of straddling the balance of living within your means, without putting yourself in your very own personal financial lockdown, is that you are well-prepared for when rates drop again.
Continuing this way of life will have dramatic effects on your financial future when the sun is shining on your finances.
But why would you? Because we are way too clever to be fooled twice! We will now take control of what you are able to control (how we spend, the choices we make with our money), to safeguard us against the things we cannot (cost of living, rising rates, etc.)
When you have made the choice to simplify your life a bit, if paying off your debt matters to you, it’s time to apply this strategy to be prepared to lower your debt in a way that suits you best.
Having a mortgage debt reduction strategy that suits you and the way you earn money, is paramount in making financial freedom from your lending.
There are various methods that banks offer to help us pay off our mortgage debt. As a mortgage broker and financial adviser, I assist you in finding the bank that can provide you with the best options for how you want to lower your loan - Lump sums, over payments, flexible accounts, or a mix of strategies. Often people have not considered a bank other than the one they are at. You will be fascinated to find out how varied lenders can be in this area.
We often focus on the interest rates and think that that is how we get the best ‘deal’ with our bank. However, interest rates are another thing that is out of our control, (and remember, we are now all about focusing on the things that are within our control!)
You will discover that partnering with the best bank for your repayment strategy would allow you to save so much more on interest repayments than simply focusing on their interest rates!!
My advice is to meet with us to look at your current situation and make those plans for when the financial sun peaks back through the clouds, so that you are ready with the right plan and at the right bank.
In the meantime, we have a helpful budget tool that shows what overpaying your loan could look like to the reduction of mortgage debt. Let me know if you would like this as I can send this to you.
Lance.
About Lance
Hi, I’m Lance a Financial Adviser here at Velocity Financial. People in Finance love to make it all seem too complex. I see my role as removing these barriers, opening your opportunities, and connecting you with the sharpest and most helpful professionals Wellington has to offer. I am interested in people and enjoy being part of key (and often the most stressful) stages in their lives. From my background in heading up large social development projects, finding finance and resource to bring about change for some of our most vulnerable New Zealanders, to my role as a marriage celebrant helping organise one of the most dramatic, stressful, wonderful, precious days of people’s lives. Now as a Financial Adviser I'm able to help people reach their financial goals and help provide security by insuring them against life's challenging times. I love being active, boxing, running, surfing, basically if there is a chance of some form of activity I am on board. Music is extremely important to me, and I have been privileged to travel around many parts of the world playing drums.
Disclaimer: Lance Shearman (FSP431426) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Lance’s disclosure statement on our website.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures https://www.velocityfinancial.co.nz/disclosure-statement.