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5 Ways to Pay Off Your Mortgage Sooner

When buying a home, to live in or as an investment, most people will have the goal of eventually paying it off.

A 30-year loan might seem like a long time to be making repayments, but you won’t be stuck paying interest if you’re able to pay it off sooner.

Here are five ways to help achieve that.

5 Ways to Pay Off Your Mortgage Sooner

Pay Fortnightly

 

The easiest way to reduce your mortgage is to pay it more often. If you’re making fortnightly repayments instead of monthly, you will be making more repayments over the course of a year and therefore are paying it off sooner.

There are 26 fortnights in a year, but only 12 months.

That might not seem like all that much, but it could save you five years on your mortgage thanks to the power of compounding.

 

Pay More

 

One of the best things to spend your money on is reducing debt. If you get a regular bonus from your work, consider putting at least a portion of it into your mortgage.

If you do this every single year, you’ll be reducing the principal component a lot faster and therefore pay less interest. Over time, it will shed years off your mortgage.

 

Don’t Max Out Your Borrowing

 

Just because you can borrow your maximum amount, doesn’t mean you should.

If you want to pay off your home faster, you could simply look at buying a home for less than what you are able to service. That way, you can put the additional funds into paying down the loan which will help you pay off the mortgage a lot faster.

 

Refinance

 

Another way to reduce your mortgage repayments is to refinance to a new home loan product with a lower interest rate.

That way you can make the same level of repayments but put more towards the principal component. You’ll then be paying off the loan faster.

At the same time, you can also look at refinancing and rolling over some higher interest debts, such as car and personal loans, into your home loans. You can then take those savings and put them into your home loan.

 

Use an Offset Account

 

If you’re able to budget well, it’s possible to incorporate the use of an offset account into your mortgage planning.

By putting your monthly expenses on credit card and letting those funds sit in your offset account, you’ll in effect have more money to put towards your home loan by saving on interest. Just be sure to pay off the credit card each month.

By |February 5, 2022|Categories: Insurance|Tags: |0 Comments

How To Reduce Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance can be a great tool to help homebuyers get into a property that they otherwise might not be able to afford. However, it comes with a cost.

LMI is a one-off insurance premium that is put in place to protect the lender in the event the borrower is unable to manage their repayments. For many loans, LMI can add a significant upfront cost.

LMI is normally applicable when a borrower is seeking to get a loan with an LVR of more than 80 percent.

Using LMI can be a very valuable tool for many homebuyers, as it might allow you to purchase a property years ahead of when you might have otherwise. You’ll be buying a property in today’s dollars and can benefit from any capital growth, instead of being required to pay a higher price at a later point.

If you are required to pay LMI, there are some ways you can potentially reduce the cost.

How To Reduce Lenders Mortgage Insurance (LMI)

Lower the LVR

 

LMI is applied on a sliding scale, meaning that it is not a fixed sum and depends on the value of the property as well as the LVR.

The further from 80 per cent LVR, the more LMI you will be required to pay, as this represents more risk for the lender. If you go over 90 per cent, LMI can increase.

Even a slightly higher deposit can help lower the LMI costs.

 

Use a Guarantor or the FHLDS

 

Depending on the type of homebuyer you are you might be able to access a program that helps reduce the LMI burden.

First homebuyers are potentially eligible for the First Home Loan Deposit Scheme. This grant lets homebuyers put down a 5 per cent deposit, with the Federal Government effectively removing the LMI cost.

Otherwise, you could look at a guarantor loan or a family pledge, where a family member puts up equity in their own home to help cover a deposit shortfall.

 

Work in Certain Professions

 

Some lenders allow certain professions to access higher LVR loans without the need to pay LMI.

This is generally available for professionals in speciality industries such as lawyers, doctors, physiotherapists and dentists.

By |February 5, 2022|Categories: Insurance|Tags: |0 Comments

How Much Can I Borrow with a Guarantor?

As house prices continue to rise across the country, getting into a new home can be tricky for first home buyers. Fortunately, if you’re able to get the help of a guarantor, it might mean you can get into a home of your own sooner rather than later.

A guarantor is normally a close family member; in most people’s cases, that means their parents. By using a guarantor to get a home loan, you can potentially put down a lower deposit. However, it doesn’t necessarily mean you will be able to borrow more money.

A Guarantor Loan

How Much Can I Borrow with a GuarantorIn the case of a guarantor loan, a close family member puts up equity from their own property as a form of a deposit to help you to purchase a home. Most lenders require a home buyer to put down a 20% deposit to get a home loan. This reduces their risk in the event you’re unable to continue to pay off your home loan.

If you are unable to put down 20%, you can take out a higher LVR loan and pay Lender’s Mortgage Insurance (LMI). LMI is put in place to protect the lender and is a one-off, upfront premium.

The issue with LMI is that it is normally tens of thousands of dollars and can significantly reduce your ability to buy a home, especially if you were already struggling to come up with a deposit.

By using a guarantor, you’re effectively able to sidestep these two issues and use what deposit you have in conjunction with the equity in the home of a relative. Using the guarantor’s equity takes your deposit up to that 20% threshold that most lenders like to see.

How Much Can I Borrow?

The big misconception with guarantor loans is that you can borrow more money. That is generally not the case, as your ability to borrow money is based on your ability to service the loan, or your ‘serviceability’, as it’s called. Your serviceability is determined by your income and ongoing expenses.

In reality, if you are effectively borrowing 95-100% of the property value with the help of the guarantor, you are likely to be able to borrow less because your overall LVR is higher. However, if you’re struggling to come up with a 20% deposit, a guarantor loan is a great way to get into the property market and get a home of your own.

By |September 7, 2021|Categories: Fixon Homes, Insurance|Tags: |0 Comments
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