Mortgages
Tips on reducing your mortgage interest cost and term
Your mortgage is probably the biggest debt you will ever have and the
accumulated interest cost over your life time can range in the hundreds
of thousands. Naturally you feel motivated to get rid of this debt as
soon as possible and fortunately you can have a big impact on the term
of your mortgage with a little bit of work.
Let's have a look at a mortgage of $350,000 on an average interest rate of 7%.
If it is paid off at $537 per week it takes 30 years and the cost of interest comes to $488,381. Sad isn't it? Of course over this time your home should increase in value but it would be nice to lower this cost.
Let's have a look at the cost after we increase our weekly payments:
How increased weekly payments reduce the cost of interest *
How increased weekly payments reduce the term *
* These results are for a mortgage of $350,000 at 7% p.a. with weekly payments starting at $537
It's easy enough to talk about extra payments but in reality it is hard to commit to them over the long term. Especially when we are all open to sudden changes in income levels and changes in interest rates.
You can, however, structure your home loan so that these extra payments are optional from week to week and you can redraw them in case of emergency. Changing your payment frequency and combining your bank accounts into the home loan can also impact the interest cost.
There are a number of things we look at before deciding how you achieve all this without increasing the minimum home loan repayment. The main things which help us decide how the mortgage should be structured are:
- Your personal discipline levels when it comes to your money
- Your budget, income, expenses etc
- Future plans, baby, renovations etc
To find out more about how to save money on your mortgage, call us or send us an email.
I have been impressed by Hamish's understanding of the NZ mortgage market, ability to source the best rates and his prompt action. He has been innovative with his advice and proactive in all his dealings. Totally Recommended.
Kesh Maharaj - Botany Downs
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