Reckon you could scrounge together an extra $50 each week to pay off your mortgage? If so, latest modelling shows the average household with a $400,000 loan could save $46,992 and pay off their home loan four years faster.
This week we’re going to look at the benefits of paying just a little bit more off your mortgage each week.
Now, this is quite a timely subject because the RBA has just delivered back-to-back cash rate cuts, so even if your monthly repayment amount has been reduced, there’s a lot to be gained by sticking to the same amount you’ve been paying over the last few years.
Breaking it down
One of the biggest problems people run into when trying to pay off their mortgage faster is trying to do so in big, irregular lumps.
It helps a lot more if you break it down.
So instead of trying to pay an extra $150 to $300 extra each month, break it down to a weekly amount that you can actually commit to, like $20 to $50 a week (or $3 to $7 a day – basically one or two takeaway coffees).
Breaking it down into smaller figures also helps reinforce good habits, and can help with your family’s cashflow.
Below, we’ll look at some modelling conducted by AMP that shows the benefits of setting up a weekly direct debit that will automatically pay an extra $20 to $50 a week off your mortgage.
What an extra $20 (aka a lobster or mud crab) a week gets you
– $400,000 loan: save $21,281 in interest and pay it off 1 year and 9 months faster
What $50 (aka a pineapple) a week gets you
– $400,000 loan: save $46,992 in interest and pay it off 4 years faster
What $100 (aka a lime) a week gets you
– $400,000 loan: save $78,828 in interest and pay it off 6 years and 11 months faster
Check out the full list here, which covers loans of $300,000, $500,000 and $1 million. All the calculations assume that you’re five years into a 30-year average home loan.
Get in touch
If you want some more tips on paying off your mortgage sooner – or you want to discuss your refinancing options – then get in touch.
We’ve got plenty of ideas up our sleeve and always love sharing what we’ve learned with our clients.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.