The Key to Paying Off Your Mortgage

I am sure you will all agree, we are all finding it harder to make ends meet.  It is a constant exercise trying to achieve this or even save money.  The great news is your mortgage can actually work for you in saving more, and reducing debt.

You need to start with a savings target.  Look at your current budget and spending habits and work out what you can potentially save.  Let’s say you start with a target of $50 each week.  Look at investing this into your home loan.  Your home is a tax-free asset and by putting this money into your home loan, it won’t generate interest income, however it will produce valuable reductions in interest costs.

Compare this saving to investing in a term deposit. You may earn 5.5% interest, however after inflation and income tax you may only end up earning approximately 2% on your investment.

The second bonus of putting this $50 into your home loan is that you reduce your debt at the same time. Depositing an extra $50 each week into a $300,000 mortgage at the rate of 7% could see you save up to $81,000 in overall interest and be mortgage free approximately six years sooner.  The key is to use your redraw facility sparingly.