Bank Secrets to Destroy Your Mortgage

We share the secrets bank and lenders don’t tell you to pay off your mortgage quicker and become debt free.  See if you already do these four tips to save interest on your mortgage:

1. Repayment Frequency

Do you pay your mortgage repayments monthly? If so, did you know you may be setting the repayment of your loan back further and paying more than you have to in interest repayments.

By changing your repayments to fortnightly, you could potentially save thousands in interest repayments and shave months (or even years!) off the term of your loan.

The trick is to make sure you’re making the ‘right’ type of fortnightly repayments…

Some lenders will calculate fortnightly repayments as half of your monthly repayments, paid every fortnight (the ‘half monthly’ method); while some will calculate it as your annual repayments divided by the number of fortnights in a year (26) (this is called the ‘true’ fortnightly method).
In the scheme of things it doesn’t seem like a big deal, but can make a huge difference.
For instance, if you had a $300,000 loan with a 6% interest rate over a standard 30 year period, the bank would calculate your monthly repayments to be $1,799 each month. If you were to pay monthly repayments for the entire term of the loan, you’d pay $347,515 in interest straight into the bank’s pocket. Using the ‘half monthly’ fortnightly repayment method, your repayments will now be $899 per fortnight (as opposed to $830 per fortnight for the ‘true’ fortnightly method) and you’ll pay $274,115 in interest over the term loan. This is an interest saving of $73,400, which will also help you pay off the loan more than 6 years earlier!

Action to take for you: look at your repayments, check how often you make repayments, see if half monthly, fortnightly repayments can work for you – it’ll be shredded in no time.

2. OFFSET account got one?
An offset account is a transaction account (like the one you probably use to make everyday purchases) that you can make deposits into and withdraw from whenever you like – you can even set up a debit card that’s connected to the account to make your usual purchases.

The advantage of keeping your savings in an offset account is that you can reduce the amount of interest charged on your home loan that means more money in your pocket and less in the bank’s. The higher the balance of the offset account and the longer the period the money’s left in there, the less interest you’ll pay, which in turn could help you to pay off your mortgage sooner!

So how’s it work?

Let’s say you’ve got a $400,000 loan with an interest rate of 5% over a standard 30 year period. If you were to keep $10,000 in your offset account for the full term of the loan, you’ll save over $30,000 in interest repayments to the bank and have your mortgage paid off more than a year earlier the impact is even greater if you are able to save a regular amount into your offset account each month!

Action to take for you: is to check out offset accounts and whether your lender offers them or contact us for some further info – it’ll be shredded in no time.

3. SERIOUS about saving on your MORTGAGE?
Well you need to be serious about saving more money.

How simple ways like not eating out so much – pack a lunch for work, stop buying so many coffees, stick to budgets, buy second hand – the list is endless.

Whilst watching where you spend money is important you can always increase your savings by increasing your income through more training, promotions, side hustle or even selling unwanted items around the house.

If you put that extra savings towards your mortgage or offset account you will paydown your mortgage saving you interest you would normally pay to the bank. It could also result in paying your mortgage off quicker and been debt free sooner.

We this as the banks make less money from you and your money goes towards YOU, owning your HOME.  The longer you take to pay your mortgage the more money banks make.

Action to take for you: is to save more by cutting expenses and increasing your income helping you become debt free quicker = owning your home.

4. Your Interest Rate
You would be crazy NOT to do this.

This is the last of our Debt Gym tips for now and we have saved the biggest till last.

The impact on destroying your debt is HUGE as you can see in the image.

In the example this is the mortgage:
Loan Amount: $450,000
Current Mortgage Rate: 4%
Loan Term: 25 Years
Total Paid to Bank: $712,637

Alternative Interest Rate: 3.10%
Total Paid to Bank: $618,892

By taking only 0.9% off your home loan interest rate in this example they save $93,745 over 21.9 years. That’s NUTs!

To do this only takes a 5 minute call to your lender.
The key bit is next, we will share our step by step phone script that has worked nearly every time with our clients.

To get a copy of the steps DM or contact us and we will give it to you for FREE.

7Wealth Pty Ltd ABN 44 609 210 246, is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/ or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.

December 13, 2019