Best tools to stay ahead on your mortgage
Getting approved for a mortgage can be a great feeling. The initial phases of the process may be a little daunting, but opening the doors of your dream home with all of the applicable finances ready to go should be a time for celebration.
While it's important to enjoy the moment, there'll come a period when the repayment plan is at the centre of your mind. You'll most likely have planned out exactly what you can afford each month long before the funds start to leave your account, but there are times when keeping up with the payments seems like too much of a chore.
However, it really doesn't have to be. There's a whole raft of tools available - many of which are free - that can help you stay on top of your payment plan, and ultimately get ahead on your mortgage.
1. Repayment calculators
As touched on, using a mortgage calculator before you take out a mortgage can give an accurate idea of just how much you can afford to pay back each month. However, few people consistently recalculate across the lifetime of their mortgages.
Doing so is an absolute necessity if your financial situation changes for better or worse. In the case of the former, you may even be able to get ahead on the payments and keep a better handle on your mortgage.
ANZ offers a comprehensive tool which takes into account any changes to interest rates in real time - particularly useful if you've financed your new home using a variable rate mortgage.
The Australian Securities & Investments Commission's (ASIC) MoneySmart financial advice site also offers a repayment calculator that has a number of functions. It allows you to work out ways to pay off your mortgage quicker, by calculating how easy or hard it would be to increase the frequency of payments.
2. Mobile Apps
Smartphones are now a necessity for the vast majority of people. There is a whole host of digital processes that can be carried out using one of the devices and fortunately, working out ways to pay off your mortgage more efficiently is one of them.
In fact, there is a swathe of apps out there that are squarely aimed at making the process of paying off a mortgage that much simpler. My Mortgage Kit from Australian company Vow Financial is available on both the Apple App Store, as well as the Google Play store.
It includes a raft of features such as a mortgage calculator, like those mentioned above, as well as an extra repayments calculator and a budgeting tool.
Similarly, Mortgage Saver - Home Loan Calculator from Mobile Web Solutions is available on both Apple and Android devices and gives you the ability to calculate repayments on fixed home loans in seconds.
Moreover, this particular app can take on information from other loans that you may have outstanding, meaning that it can also be used as an overarching budgeting tool, too.
One of the advantages of using any mobile app is the fact that it can send you notifications when your payments are due, or even just remind you to regularly recalculate the amount of money you can afford to pay back at any one time.
3. More frequent payments
While not specifically a tool, one way to better pay off your mortgage is simply to be more mindful, and constantly assess the terms, amount and frequency of any payments. The benefits of doing this can actually be pretty significant from a cost savings point of view.
Making one or two extra repayments will get you closer to being debt-free.
It may sound challenging, but it is manageable if you get paid fortnightly - equating to 26 paychecks a year - or if you're expecting a hefty bonus at any point.
Getting back to the specific savings that can be made, SFGate contributor Tim Plaehn explained that making extra mortgage payments will allow the equity in your home to increase faster, eventually leaving you clear of debt.
In even simpler terms, if you have a long-term goal of being debt-free as soon as possible, then making one, two or several extra repayments over the course of the year will get you closer to that aim, and in less time, too. In essence, any extra principal payments are like long-term investments that accrue interest at the same rate as your home loan.
Again, while your own diligence may not be a tangible tool, building a more thorough understanding of how and when to make payments can help you better manage your mortgage over the long-term.
4. Document, plan and use spreadsheets
The constant need to assess the state of your mortgage will likely present itself if you're paying a variable rate of interest. While the rates themselves may be out of your hands, there are certain steps to take to ensure that your disposable income stays at a similar level.
An effective tool over the long term can be the humble spreadsheet. Now, this doesn't mean that you need to go and buy the latest and greatest in mortgage reporting software. In fact, you can actually put together a defined plan of action and do some of the tricky calculations using Microsoft Excel or even Google Sheets.
As touched on, mortgages can be tricky to manage but there are certainly advantages to getting ahead. However, their effectiveness is directly related to how proactive you are with repayments. It's only natural to want to kickback and make the standard payments once you've secured your home loan, especially if you're on a fixed interest rate.
It's much more effective to consistently assess the amount and frequency of your payments if you're looking to unlock the most value over the entire course of your mortgage.