How to own your home faster – Home ownership acceleration guide

From

Steven Korner

Offset

An offset account is a bank account just like your transaction account and savings account, however, you do not earn interest. Rather, it offsets the interest you pay on your loan as it considers the money in the account has been paid off the loan. This still gives you the freedom to use this cash if needed while paying less interest on your Home Loan. It is crazy not to have at least one of these. Every account I own is an offset account to my loan (I have five accounts). This has saved me thousands per year.

Increase income and decrease expenses

This sounds simple, but it is one of the most effective ways to pay off your loan faster. Budgeting is key. Commit yourself to pay extra off your loan each month.
Be critical when deciding which of your expenses you can go without and think about how you can increase your income to achieve your goal. Start with the goal in mind and then work back from there. People don’t plan to fail, they fail to plan.

Review your home loan rates

You should be reviewing your home loan rates once a year. If you aren’t then you are potentially missing out on a truckload of savings.
Speak with a mortgage broker or call your bank directly. One approach is to let them know another bank has offered you a much lower rate (make sure you do your research first, of course) and ask what they can do to match the lower rate. For example, if your rate is 4.3% and you find another bank that offers you 3.8% then on a $1,000,000 mortgage you would save $5,000 a year. That $5,000 per year for the life of a home loan could be as much as $150,000. Nice.

Invest, Invest, Invest

Did you know that you need to earn $4 before tax for every $1 you pay off your mortgage?
This means that if you have a $1,000,000 mortgage you must earn $4,000,000 just to pay off the mortgage!! Let alone earn money to live. There must be a better way!
Contrary to what your parents may have taught you, the home that you live in is not an investment, it is a liability. It is important that you invest externally from your house in other assets and think about using any extra cash towards investing rather than paying down your home loan. The tax advantages and growth of your investments can help you pay off your mortgage much faster!

By Steven Korner, Financial Planner

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