Here’s a few of our tips for how to retire mortgage free by paying down your debt before you cut the cord.
If you’re looking to invest into the property market, buying smart will help ensure you’re financial secure when you retire. While a high-rise in the inner city may tick all your lifestyle boxes in your 20’s, as an investment you could experience slow growth. Buying a unit in an established suburb on the other hand, is likely to be more affordable and offer the opportunity of reliable growth.
Consider what you can afford now and what will offer investment growth long term. Exploring upcoming regional areas for example, may be more affordable than inner city property. Land for sale in the Geelong area may be better suited to your budget than a block in Melbourne.
Review your existing loan
If you have a mortgage, reviewing your existing loan could make a huge difference in how quickly you pay it off. Compare your current interest with other lenders and consider whether you can make additional or more regular repayments.
You’ll be able to live mortgage-free quicker if you make fortnightly or weekly repayments rather than monthly. If you switch to a lower interest rate loan and continue the same repayments, you’ll be able to extinguish the loan within a much shorter time frame. Alternatively, a lower interest rate gives you the opportunity to invest the repayment difference elsewhere. For example, you might look at investing in dividend-paying shares.
Reduce your loan terms
While increasing your loan term will result in lower repayments now, you’re going to incur a higher interest bill. Refinancing your mortgage to a shorter term may mean you pay a little more now, but you’ll be mortgage-free much earlier.
Some lenders may allow you to calculate your repayments at a reduce term, but keep the paperwork at the original agreed term of say 30 years. That gives you the flexibility to return to your previous repayments if you can’t sustain it in the future.
Live off an interest-free credit card
This advice only applies for those who are disciplined, otherwise by living off a credit card you could run into some serious financial troubles. While you may be saving money by putting your pay check into an offset account, you can potentially save even more buy also using an interest-free credit card.
Once you’ve paid your mortgage repayments, place the rest of your pay into your offset account to minimize your interest expense. Living off an interest-free credit card allows your money to sit into the offset account for longer and helps you reduce the interest you pay on your loan.
Consider renovating rather than upgrading
Often the first time we invest in property is when we’re young and child-free. Before too long, the property can feel inadequate and no longer meet our lifestyle requirements. Instead of the little 2-bedroom cottage you purchased in your late 20’s, you may desire a more substantial home in your late 30’s.
Before you consider selling up and purchasing a bigger property with an even bigger mortgage, consider renovating. Making improvements to your current home will not only enhance your lifestyle, but can also increase your property value. Consider consulting with reputable designer home builders in Melbourne or your local area to see what’s possible. It’s also worthwhile speaking with a real estate agent to gain an understanding of the sale potential of your renovation.
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