I paid a 25 year off in about 12 years. I paid fortnightly then when interest went down i still paid the higher rate. Also any extra payments from my company went totally to the mortgage automatically. Then for the last payment i made a few months payments in one hit. I also didn't waste money on new cars or vacations.
Congrats, thats an incredible achievement! That is another secret that people dont really realise, when the rates (eventually) go back down you can keep the repayments higher to pay it off quicker. Equally when you refinance you can do the same. If you were paying 7% interest rate, and refinance to 6.20% you keep making the higher repayments even though your rate is lower! I like this calculator which displays it clearly moneysmart.gov.au/home-loans/mortgage-switching-calculator Congrats again and thank you so much for watching!!!
@lilimeza4017 When the mortgage was set up it was done as an automatic deduction from my fortnightly pay. This automatic deduction looked at all money not just pay that came from anywhere When paid other extra, the bank would see as my normal pay, and as it was less than my normal pay and mortgage payment, they would take the lot. The interest went high early on, and they would automatically adjust up each time but when it went down I had to adjust but I didn't. Just kept paying the same. Any birthday, Christmas presents also got paid in. I didn't spend on new cars , still got my 2005 lancer. The only renovation was a bathroom cabinet $ 3000 because it fell apart. Never went on vacation or out so money was building in bank. Paying the house was priority did nothing else. Eventually took cash from bank and paid in bulk. Basically I didn't plan or do anything deliberately. I'm lazy and a bit mean. The mortgage was $ 100000, which is low by today's standard.
Yes, you're correct! Making more frequent payments, such as monthly, is generally better than making a lump sum payment at the end of the year because it reduces the principal balance more regularly. This, in turn, decreases the amount of interest you're charged over the life of the loan. Since interest is calculated on the outstanding balance of the loan, reducing the principal more frequently means you'll be charged less interest.
Definelty don't lump sum it, if you have an offset or redraw ensure almost every penny sits in it. Leave yourself money in smart access for the necessities only.
Very true - If your goal is to move to a nicer place in a few years, putting extra funds into an offset account might be the more flexible and beneficial option. An offset account can reduce the interest you pay on your mortgage, similar to making extra repayments, but with the added benefit of retaining access to your money. This flexibility can be particularly valuable if you need the funds for your next purchase or for other expenses. It essentially offers the best of both worlds: saving on interest costs while keeping your savings liquid and accessible for future plans.
Yeah they definitely go down, during COVID the cash rate went to 0.10% from 4.35% currently so they just move in cycles - sometimes up, sometimes down. www.rba.gov.au/statistics/cash-rate/
So am I understanding this correctly that any additional payment made (on top of the minimum required mortgage payment) 100% of that additional payment goes towards paying down the principal as opposed to both principal and interest?
Yes, you've got it right. When you make an additional payment towards your mortgage, beyond the minimum required payment, this extra amount usually goes directly towards reducing the principal balance of your loan. This means you're effectively lowering the amount on which future interest calculations are based. Check out the calculator - www.huntergalloway.com.au/home-loan-extra-repayment-calculator/
@@MortgageBrokerAustralia that’s fantastic here I am thinking I needed to look for a specific product with a financial institution to achieve this. Thank you for the explanation
And any money you aren't using sit it on there and use another line of credit then pay that off before the interest for that kicks in. I àm dumping all my pay into my mortgage and using zippay all month then pay it off each month before I get charged the fee. It's called velocity banking. I saved $148 this month just by doing that...you have to be disciplined but it's really worth it
Exactly you ideally want to keep the loan term the same if you can, to allow you to keep paying it off on the original term. so if you took a loan out in 2000 - over 30 years - it would be done and dusted by 2030 for example.
Alter the frequency to fortnightly add extra 500-700 repayments obviously 2 people is easier on decent wage and wallah loan reduced by 17 years enjoy either investing in another and or being mortgage free by 40
Its alright every little bit matters! This calc is a good one to give you a bit of hope showing the difference in costs (and years) the extra repayments make www.huntergalloway.com.au/home-loan-extra-repayment-calculator/
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It's not easy to pay extra in this climate now, especially families, I still think something is better than nothing as you say.
Yeah exactly, I think $1,000 is an extreme example but every little bit helps!
I paid a 25 year off in about 12 years. I paid fortnightly then when interest went down i still paid the higher rate. Also any extra payments from my company went totally to the mortgage automatically. Then for the last payment i made a few months payments in one hit.
I also didn't waste money on new cars or vacations.
Congrats, thats an incredible achievement! That is another secret that people dont really realise, when the rates (eventually) go back down you can keep the repayments higher to pay it off quicker.
Equally when you refinance you can do the same. If you were paying 7% interest rate, and refinance to 6.20% you keep making the higher repayments even though your rate is lower! I like this calculator which displays it clearly moneysmart.gov.au/home-loans/mortgage-switching-calculator
Congrats again and thank you so much for watching!!!
Can you guide me through this??
@lilimeza4017 When the mortgage was set up it was done as an automatic deduction from my fortnightly pay. This automatic deduction looked at all money not just pay that came from anywhere
When paid other extra, the bank would see as my normal pay, and as it was less than my normal pay and mortgage payment, they would take the lot.
The interest went high early on, and they would automatically adjust up each time but when it went down I had to adjust but I didn't. Just kept paying the same.
Any birthday, Christmas presents also got paid in.
I didn't spend on new cars , still got my 2005 lancer. The only renovation was a bathroom cabinet $ 3000 because it fell apart. Never went on vacation or out so money was building in bank. Paying the house was priority did nothing else.
Eventually took cash from bank and paid in bulk.
Basically I didn't plan or do anything deliberately. I'm lazy and a bit mean.
The mortgage was $ 100000, which is low by today's standard.
3 principal + intrest + escrow (taxes and insurance).
Why would you do a variable interest rate on a 30 year loan?
I'm assuming making monthly payments are better than a lump sum payment at the end of the year because of compound interest? Or is it the same?
Yes, you're correct! Making more frequent payments, such as monthly, is generally better than making a lump sum payment at the end of the year because it reduces the principal balance more regularly. This, in turn, decreases the amount of interest you're charged over the life of the loan. Since interest is calculated on the outstanding balance of the loan, reducing the principal more frequently means you'll be charged less interest.
Definelty don't lump sum it, if you have an offset or redraw ensure almost every penny sits in it. Leave yourself money in smart access for the necessities only.
Is it better to pay extra $$$ directly into the mortgage or to put it in an offset.
Goal is to hopefully move to somewhere a bit nicer in a few years.
Very true - If your goal is to move to a nicer place in a few years, putting extra funds into an offset account might be the more flexible and beneficial option. An offset account can reduce the interest you pay on your mortgage, similar to making extra repayments, but with the added benefit of retaining access to your money. This flexibility can be particularly valuable if you need the funds for your next purchase or for other expenses. It essentially offers the best of both worlds: saving on interest costs while keeping your savings liquid and accessible for future plans.
@@MortgageBrokerAustralia thanks for the info!
Do interest rates go down? do you think that will happen?
Yeah they definitely go down, during COVID the cash rate went to 0.10% from 4.35% currently so they just move in cycles - sometimes up, sometimes down. www.rba.gov.au/statistics/cash-rate/
So am I understanding this correctly that any additional payment made (on top of the minimum required mortgage payment) 100% of that additional payment goes towards paying down the principal as opposed to both principal and interest?
Yes, you've got it right. When you make an additional payment towards your mortgage, beyond the minimum required payment, this extra amount usually goes directly towards reducing the principal balance of your loan. This means you're effectively lowering the amount on which future interest calculations are based. Check out the calculator - www.huntergalloway.com.au/home-loan-extra-repayment-calculator/
@@MortgageBrokerAustralia that’s fantastic here I am thinking I needed to look for a specific product with a financial institution to achieve this. Thank you for the explanation
And any money you aren't using sit it on there and use another line of credit then pay that off before the interest for that kicks in. I àm dumping all my pay into my mortgage and using zippay all month then pay it off each month before I get charged the fee. It's called velocity banking. I saved $148 this month just by doing that...you have to be disciplined but it's really worth it
So, when you refinance is that the issue, if they add years and put to 30 years again? So are we supposed to ask for less years when refinancing?
Exactly you ideally want to keep the loan term the same if you can, to allow you to keep paying it off on the original term. so if you took a loan out in 2000 - over 30 years - it would be done and dusted by 2030 for example.
As always, good content. 😊
Thanks so so much for watching I apprentice it !!
Alter the frequency to fortnightly add extra 500-700 repayments obviously 2 people is easier on decent wage and wallah loan reduced by 17 years enjoy either investing in another and or being mortgage free by 40
Could do the same with an offset account ;)
Absolutely, using an offset account is another effective strategy to reduce the amount of interest you pay on your mortgage. Every little bit helps!!!
I'm triple payment my mortgage. Two years, not twelve
Nice one !
it's so disheartening seeing how slowly the amount due goes down. It's like taking three steps forward and 2.8 steps back lol
Its alright every little bit matters! This calc is a good one to give you a bit of hope showing the difference in costs (and years) the extra repayments make www.huntergalloway.com.au/home-loan-extra-repayment-calculator/
Imagine this. telling people information they already know.
Thanks for watching.
Not everyone’s clued up like you. Ain’t got anything good to offer…keep it shut.
But.... you did watch....... so I'm thinking, jeolous?
Bitter?
Waaaaaa
@@mickeykozzi