Retiring mortgage-free is a goal for many people. This will provide you with financial stability and security for the future. It reduces your financial obligations. Plus, it is easier to live a life with minimal debt when retiring.
If you wish to retire without a mortgage, here are five tips you can use to pay off your mortgage early.
1.Switch to fortnightly repayments
Instead of paying every month, why not pay twice a month? You can ask your lender if they can switch your payment frequency to fortnightly. This will allow you to squeeze in one extra monthly repayment a year, because there are 26 fortnights in a year, not 24. This will help you shave years off your mortgage term.
2. Double up your payment
Paying more than the minimum required is another helpful tip that can help you retire mortgage-free. Making extra repayments can save you time and interest. Even a small amount can make a huge difference.
As an example, imagine your mortgage amount is $350,000 with an interest rate of 3.64%. On top of your minimum fortnightly repayments, you pay an extra $100 for five years. The interest you’ll save is $20,346, and you’ll be able to cut your mortgage term by three years.
3. Make a lump sum payment
If you can afford to make a single huge lump sum payment then this is another great method you can use. Essentially, when you reduce your principal amount, you’ll pay less in interest and it’ll reduce your mortgage term.
4. Take on an redraw offset facility
A redraw offset facility is a useful home loan feature. Any amount of money you have in this facility will offset daily against your loan balance. Plus, you can also redraw funds from your facility when you need it.
As an example, your loan amount is $350,000, and you have $15,000 in your redraw offset facility. Your lender will then calculate interest on only $335,000 instead of the original loan amount.
5. Consider a shorter loan term
If your original loan term is 30 years, why not refinance to a shorter term like 15-years. The repayments may get higher but this will let you pay off your mortgage early and you can save a huge amount on interest.
These are just some of the things you can do to be mortgage free before retirement. Make sure to plan your finances carefully so you can achieve the lifestyle you want in the future.