Are you considering paying more into your mortgage? Increasing your monthly payments might seem counterintuitive, but savvy homeowners know the financial benefits it can bring.
Today, we unpack why paying more into your mortgage could be advantageous and explore strategies to help you pay off your home finance plan faster.
Understanding The Potential Savings
Paying extra into your mortgage can yield substantial long-term savings. Even small additional monthly payments can significantly reduce the overall interest you pay and shorten the term of your loan.
For instance, did you know that adding just a few hundred dollars to your monthly payment can shave off years from your mortgage and save you thousands in interest?
Calculating The Impact
To grasp the full impact of paying more into your bond, ask us to do an Additional Payment Calculation. This exercise will help you visualise the potential savings based on your specific loan details.
It’s not possible to give a pure example that relates to everyone, as there are hundreds of interest rates and deals out there. But, for example, at a specific and relatable interest rate:
- If you added another $170 to your monthly home finance payments of $830, this would increase it to $1,000 per month.
- You might possibly save almost $48,000 in interest over the life span of that mortgage.
- You might also possibly reduce the life span of that mortgage by 8 years, which is a huge saving on stress as well.
Strategies For Accelerating Repayments
Here are some of the top ways you can put the above strategy into action:
- Find extra cash: Look for opportunities to cut expenses or generate additional income. Redirecting savings or windfalls, such as bonuses or tax refunds, toward your bond can accelerate your repayment schedule.
- Increase monthly payments: Even the most modest increases in your monthly payments can have a substantial impact on your loan term and total interest paid. Consider reallocating funds from discretionary spending to bolster your monthly bond payments.
- Apply windfalls to your loan: Instead of spreading out additional payments, consider making lump sum contributions whenever you receive unexpected funds. This approach can rapidly reduce your principal balance and minimize interest accrual.
- Set clear goals: Establishing a target payoff date can provide motivation and direction for your repayment efforts. Use online calculators to determine the monthly payments required to achieve your desired payoff timeline. By setting clear goals, you can track your progress and stay committed to your financial objectives.
One Size Does Not Fit All
No single approach fits all, and combining strategies can amplify your progress towards debt freedom. Whether leveraging pay raises, setting target payoff dates, or applying lump sums, a tailored approach aligns with your financial goals and accelerates your path to homeownership.
Ask a mentor to hold you accountable, which will further motivate you to prioritize this strategy. And don’t forget, the Nowik Mortgage team is always here to help you.
Secure your financial future with Nowik Mortgage’s expert guidance and tailored home finance today.