Here are #10 tips courtesy of Domain to downsize your mortgage while interest rates remain at historic lows.
Warning: some of these could hurt!
- If you double your repayments, you’ll halve your loan term – right? Wrong. If you increase your repayments by two-thirds you’ll pay off a 30 year loan in 15 years.
- Cut back the coffees. Yep – there’s no escaping the fact that small costs add up to a big cost over time. Two $5 coffees a day equals $50 a week and more than $2500 a year – that’s an extra mortgage repayment or two.
- Review your home loan every three years to make sure you’re still getting the best interest rate. Find an independent broker to help weigh up fees and switching costs.
- Start with a smaller loan amount – not the maximum a bank will lend you – and try to put half your income into repayments. Most people put about a third of their income into repayments but with tight budgeting the super savers can typically pay more.
- Set up an offset account and make sure any spare cash you have sits in here to reduce the amount of interest you pay on your loan.
- Cut back on some of the big costs. Do you really need a mega screen TV or could you save a bit to put in your offset account, and reduce your home loan interest rate?
- Consider investing in another property for 10-15 years then take your cash out to pay off your home loan. Sounds tricky right? It is. You should seek independent financial advice to see if a strategy like this would work for you.
- Budget like a pro. Set up separate accounts for your different expenses and don’t take from one to pay the other.
- Don’t feel pressured to splash the cash on an Insta-worthy lifestyle. Find free things to enjoy – like a day at the beach – rather than spending hundreds or thousands on living luxe like an influencer.
- Find a side hustle to bring in extra cash, or rent a spare room – even get bold and ask for a pay rise. You deserve it!