Finance advice
5 Savings tips to pay your mortgages off sooner

5 savings tips to pay your mortgage off sooner

By Philippe Brach

Paying off a mortgage as quickly as possible reaps many benefits – hundreds of thousands of them, actually!

By being money-smart, everyone can find ways to add ‘bonus money’ to a loan. By leveraging some simple savings strategies you can reduce the term of the loan and the interest you’ll pay, which may result in savings worth five or six figures.

These five easy steps will show you how a little can go a long way:

1. Reduce overspending.
We all do it. Unplanned purchases and impulse buying can seriously affect your financial health. Just by simply preparing a budget shows how much can be saved with a little planning. However, when creating your budget, be realistic, allow yourself some treats but once you’ve set it in place stick to it.

One of the most common overspending areas relates to services offered when we are short of time. So, for example, many of us rush off to work, buying food along the route, without considering what is already in the pantry/fridge at home. We pay inflated prices for takeaway lunches, pre-packages dinners and, of course, the coffee we can’t live without – adding a cake or pastry! So, set limits on your spending and put the additional savings towards your loan repayments.

Example: You have a 30-year loan of $450,000 with repayments of $2,400 a month at 5 per cent interest. If you add just $100 a month to your repayments, you’ll save $40,000 in interest and shave over two and a half years off the loan.*

2. Pay lump sums off your mortgage.
Instead of pocketing your tax return or work bonus, consider putting it directly against your mortgage. Every dollar over the repayment amount bites into your principal, which reduces the interest payable over the term of the loan.

Example: If you borrowed $350,000 over 30 years, at 5 per cent interest, and threw in your $2,000 tax return refund five years into the loan term, you’ll save almost $5,000 in interest*. Imagine if you did that with every tax return, every year?

3. Don’t be complacent about direct debits and insurances
Companies rely on our complacency. They want us to keep renewing insurances and subscriptions without shopping around for a better deal. Every year, do a health check of your insurances, including car, home and health, and promptly cancel subscriptions you don’t use. A long-forgotten gym membership can cost $70 a month!

And don’t forget to check your current loan/mortgage rate. Banks are very competitive these days, they are all vying for your business and there are some excellent deals to be had. So, if you haven’t checked your rate for a couple of years you may be paying over the odds. Far better to either negotiate a lower rate or change to lenders who offer better terms, pay the same amount and reduce that loan more quickly.

Example: You do some research on your car insurance and find a company that provides the same service for a cheaper price, and also have a $100 cashback deal for new customers. Make the switch and add your yearly savings and the $100 cashback to your mortgage for a small but effective boost to your repayment strategy.

4. Sell it rather than dump it.
With online selling now the norm, there’s no excuse for throwing out an old couch or TV. Take some photos, put it up for sale on online garage sale sites like Gumtree or eBay, and make a little bit of extra cash to throw onto your loan.

Example: If you’re doing a kitchen makeover put all the original appliances and fittings up for sale. There are plenty of people looking for a used fridge, oven, stovetop, rangehood, or dishwasher. Even cupboard doors or old benchtops can fetch a price. Your trash is someone else’s treasure, and they’ll be happy to take it off your hands and put some money in your pocket.

5. Stamp out your debt.
Debt kills your financial momentum. While you may be paying 5 per cent interest on your home loan, you could be forking out up to 20 per cent on your credit card or car loan.

Forget extra repayments on your low-interest mortgage until you’ve stamped out your high-interest debt – and once that liability is gone, you’ll have a ton of extra money to throw onto your mortgage every month.

Example: You have a seven-year car loan of $11,000 at 15 per cent interest, with repayments of $50 a week. Ultimately, you’ll pay $18,622 for your car. If you can pay off your debt sooner, not only will you save money on a depreciating item, you’ll also have $50 extra a week to throw onto your loan/mortgage.

* Savings calculated at InfoChoice’s extra payment calculator.

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About the Blogger

Philippe Brach

Philippe Brach

Multifocus Properties & Finance was established in 2005 with the aim of mentoring investors to create wealth and invest in their future by building an investment property portfolio.

The company is led by Philippe Brach who has over 25 years experience in the international corporate world specializing in finance, accounting and investment. He is a fully qualified and extremely experienced real estate agent, concentrating his attention solely on investment opportunities around Australia. In addition he is a highly regarded mortgage broker, being accredited with around 35 different lenders.

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  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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AREAS MENTIONED:

Eagleby
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How a move to Hong Kong impacted Julia’s Australian property goals
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
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The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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