The Four Strategies to Smash your Mortgage

By Brendon Ojala

Imagine waking up one day to find zero dollars owing on your home loan. For many of us, this can seem like a far-fetched dream, but there are many things you can do to bring that dream a lot closer.

1)When you refix your loan, if rates have dropped, keep the payments the same.

For example, if you are paying 3.25% on your current $500k loan, and you re-fix at 2.25% (assuming no further changes for the life of the loan - ridiculousI know, but bear with me), keeping the payments the same, you will save five years on the life of the loan. Putting it more accurately, paying $60/week more than the minimum on your loan, for the life of the loan, will take five years off it.

The next three strategies rely on you working out what your weekly budget surplus is. Once you have done this, strategies two, three or four can be used.

2) Put your weekly budget surplus in a separate savings account and link this account to an offset loan. Any money in the savings will offset the interest you pay on your loan and you will get it paid off quicker.

3) Put the surplus funds into a revolving credit account (and, quick bonus tip, you can access that money again down the track). Of course, this can be a "good news, bad news" story for debt reduction if you do keep accessing those funds!

4) Increase your loan repayments by the amount of weekly surplus funds. If you do this right you won't have to pay break fees and, if you are really clever, you may still be able to "re-draw" those funds without having to go through a new application process.  

Which one is best for you? Of course, it will all depend. Ask an adviser atVelocity Financial and we'll work this through with you.

Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. A disclosure statement is available upon request.

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