Buying a home is a big step, but having a mortgage can last for a long time. Luckily, there are smart ways to pay off your mortgage early and save mon
Buying a home is a big step, but having a mortgage can last for a long time. Luckily, there are smart ways to pay off your mortgage early and save money along the way. In this article, we’ll discuss easy-to-follow strategies specifically for people in New Zealand. By using these tips, you can speed up your mortgage repayment and achieve financial freedom sooner.
1. Make a Realistic Budget
To start paying off your mortgage early, it’s important to create a practical budget. Look at how much money you make, your expenses, and how much you save. Find areas where you can spend less, like cutting back on unnecessary things. Make a budget that allows you to put extra money towards your mortgage each month. This will help you stay on track and pay off your mortgage faster.
2. Pay Every Two Weeks
Consider making bi-weekly mortgage payments instead of paying once a month. Split your monthly payment in half and pay that amount every two weeks. By doing this, you’ll make 26 half-payments in a year, which is the same as 13 full payments. This extra payment each year will shorten your mortgage term and save you a lot of money on interest.
3. Round Up Your Payments
Another simple way to pay off your mortgage early is to round up your payments. If your monthly payment is, for example, $1,400, you can round it up to $1,500 or even $1,600. Paying a little extra each time will help reduce your mortgage balance faster. Over time, this will save you money on interest and help you pay off your mortgage sooner.
4. Use Lump Sum Payments
Some mortgage agreements in New Zealand allow you to make extra lump sum payments without any penalties. Take advantage of this option whenever you have extra money. When you receive a bonus, a tax refund, or any unexpected cash, consider putting it towards your mortgage. These lump sum payments will lower your mortgage principal and save you money on interest over the long run.
5. Consider a Shorter Mortgage Term
If interest rates have gone down since you got your mortgage, it might be a good idea to refinance to a shorter term. This means getting a new mortgage with a shorter repayment period. Although your monthly payments may increase a bit, you’ll be able to pay off your mortgage faster and save a significant amount on interest. Talk to mortgage experts or financial advisors to find out if refinancing to a shorter term is right for you.
6. Get Professional Advice
Mortgages can be complicated, so it’s wise to seek advice from experts. Talk to a mortgage specialist or a financial advisor who can guide you through the process. They can help you understand different repayment options, assess the impact of interest rate changes, and find the best strategy for paying off your mortgage early. Their advice will help you make informed decisions and maximize your savings.
7. Boost Your Income
Finding ways to increase your income can help you pay off your mortgage faster. Look for part-time jobs, freelance work, or other side hustles that can bring in extra money. You could also consider renting out spare rooms or parking spaces, or taking advantage of sharing economy platforms. By earning more money, you can put additional funds towards your mortgage and achieve your goal of early repayment.
Conclusion
Paying off your mortgage early requires dedication and smart financial choices. By following these simple strategies, you can make significant progress in paying off your mortgage in New Zealand. Remember to create a budget, consider bi-weekly payments, round up your payments, use lump sum payments, think about a shorter mortgage term, seek professional advice, and find ways to boost your income. With determination and these strategies, you’ll be on your way to paying off your mortgage early and saving money in the process.
