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How I slashed 10 years off my mortgage

Tweet Mortgages – something most “grown-ups” have these days. Big heavy things that rest around your neck for 20, 30 or 40 odd years. I’ve even heard of some UK based mortgage companies allowing people to take on mortgages to be passed onto their kids. Mortgages – the evil (?) that allow us to buy [...]

Mortgages – something most “grown-ups” have these days. Big heavy things that rest around your neck for 20, 30 or 40 odd years. I’ve even heard of some UK based mortgage companies allowing people to take on mortgages to be passed onto their kids.

Mortgages – the evil (?) that allow us to buy homes, businesses and other large scale items that in theory help us live our lives.

My mortgage has 26 years to run on it, it’s burning through my income like nothing else, and right now in the housing market the way it is, I’m not seeing the returns on the property that I might have 10 years ago. Still I’m not that far into the whole house ownership thing to worry about that. Sadly as mortgages as¬†structured in the first few years you pay mainly interest, and a little principal.

My mortgage is up for renewal and an opportunity presented itself for me to make some significant in-roads into my mortgage.

How I slashed 10 years off my mortgage

Last time I renewed I was caught by the raising interest rates, the falling economy and a few other factors. My wife and I decided that we’d lock in at an “okay” interest rate for 18 months. That rate was just under 9% pa.

This meant we scrimped and fought for every cent & dollar to live – but at least we managed to pay the mortgage.

Now, 18 months on, we survived that time of tightness & sure we don’t have the new lounge suite, nor Sony Alpha DSL or 50″ Plasma TV and our kitchen isn’t finished. ¬†But we made it.

Of course we are about to renew the mortgage at the current interest rate of just over 6% pa. That’s just shy of a 3% drop.

It dawned on us that we’ve already be paying $WXYZ a fortnight & haven’t really missed it (okay so we have missed it but…we survived) – so lets leave the repayments as they currently are. Sure it’ll continue to be a bit tight for another year or so – but we’ll slash 10 years off our mortgage & save ourselves hundreds of thousands of dollars in interest!

Learnings

If you have a mortgage, pay as MUCH as you can. You will be amazed how much difference $10 a fortnight can make. If you can go to $50, $100 or more … then do it. Sacrifice a little now – to gain a LOT down the track! Do you really need THAT 50″ Plasma or will your current TV do? Do you really need an iPhone or will your Nokia be fine for another year?

* note: of course I realise that in 12 months time when I renew again, interest rates will have changed and 10 years might end up being 8 years … but any year OFF the mortgage is a great year!

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