Hello and welcome to the final article in our mortgage series. We’ve previously discussed how much of a mortgage is too much, and when you should start repaying it. Now, we’re delving into how you can efficiently repay your mortgage.

To begin, let’s use an example. A $1 million mortgage repaid over 30 years could cost you around $1.3 million just in interest. That’s a substantial , and anything we can do to reduce that interest bill is worth considering.

While most borrowers focus on their interest rate, the real key lies in the rate at which you repay.

The faster you can repay your mortgage, the less you’ll pay in interest over time.

So, today we will explore three effective strategies to speed up your mortgage repayment.

1. Overpaying your Mortgage

The first strategy involves overpaying your mortgage. This doesn’t mean giving more money to the bank than necessary – it means paying more off the principal. Your monthly mortgage payment includes both principal and interest. When you overpay, you increase the principal portion of your payment, reducing the loan balance more significantly.

If you can consistently maintain higher payments, you will reduce the time you’re in debt and save significantly on interest. For example, if you upped your monthly payment from $6,380 to $7,000 on your $1 million mortgage, you would trim about 7 years off the mortgage and save over $300,000 in interest!

2. Making Lump Sum Payments

The second strategy revolves around making lump sum payments. This could be a bonus payment, a windfall, or surplus income you’ve saved throughout the year. Most banks allow a one-off payment to be made towards the principal of your mortgage once a year, reducing the interest you pay over the life of the loan.

For those with uncertain incomes or expenses, regular lump sum payments can be the best option. However, until you make the payment, you’re usually not getting a great rate of return on your savings.

3. Using an Offset or Revolving Line of Credit Loan Account

Our third strategy involves using an offset or revolving line of credit loan account. These accounts reward you as you save up to make a lump-sum payment.

Savings stored in a linked offset mortgage account can earn a higher return than a traditional savings account, and a revolving line of credit collects all your surplus income throughout the month.

Both these methods take advantage of the fact that interest rates for savers are often less than those for borrowers. Therefore, they work best when combined with effective budgeting and spending control.

There’s no one-size-fits-all approach to mortgage repayment. The most important aspect is considering your financial personality and personal circumstances when selecting your repayment strategy. It’s also worth seeking professional advice and being open to trying different strategies.

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