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How to Invest Surplus Cash Flow

Having extra money left in your bank account each month may be a sign that you can invest more for your retirement, and that’s great news! Perhaps you’ve accumulated a surplus cash flow with careful budgeting and planning. Maybe you’re earning more than you us.....

Wealth, Lending, Refinancing - 3 min read

Paying off your mortgage faster can open up a world of financial options for you. Without a monthly mortgage payment, you may have more discretionary income, a smaller debt burden and increased freedom to realise your financial goals.

Some people pay off their mortgages early as a part of their strategic retirement planning. Others seek financial independence and increased security. Whatever your reason, there are steps you can start taking right away that will help you to pay off your mortgage faster. Let’s take a look at a few.

 

1. Pay Additional Principal Each Month

One of the simplest and easiest ways to pay off your mortgage faster is to increase the amount you pay toward principal each month. If you don’t have considerable extra income right now, you can start by paying just $50 or $100 each month along with your required payments. Over time, these additional payments can significantly reduce the amount of time you spend paying off your mortgage. You’ll also pay less in interest over the life of the loan.

 

2. Use Caution With Interest-Only Loans and Payments

Interest-only loans may seem attractive at first, especially if you’re short on income when you purchase your home. But if you want to pay off your mortgage early, this type of loan isn’t always the best option; delaying the time when your payments start lowering your principal.

 

3. Refinance Your Mortgage

If interest rates are lower now than when you first secured your loan, refinancing may help you to pay off your mortgage faster and save money on interest. Refinancing can also allow you to shorten the term of your loan.

For example, if you currently have a 30-year loan with a 6.0% interest rate, you could secure a 15-year loan with a 4.0% interest rate and keep your repayments relatively close to where they are now. This can be an effective way to pay off your mortgage faster without having to increase your repayments.

 

4. Contribute Windfalls to Your Principal

If you don’t have much room in your budget for additional repayments right now, consider contributing windfalls to your principal instead. If you get an unexpected bonus at work or a cash gift from a relative, resist the urge to splash these windfalls on a shopping spree or extra holiday. Instead, pay down that mortgage. You’ll be grateful for your discipline in the long run.

 

5. Consider a Split Loan

While we often debate the merits of variable loans and fixed loans, it’s possible to have the best of both worlds included in a single loan. A split loan includes variable and fixed components, so you can lock in a low fixed rate on part of your loan. Get in touch with our Loans and Finance Specialist about whether a split loan could help you to achieve your goals.

 

6. Take Advantage of Low Variable Rates

If you have a variable rate loan, take advantage of the times when your payments are lower by paying as much as you usually do. This takes discipline, but it can make a big difference in the length of your loan.

 

7. Make Budgetary Changes

If you decide that paying off your mortgage faster is your highest financial priority, make changes in your budget to accommodate your goal. You could divert salary sacrificed funds for a short time, or reduce spending in other areas in order to make room for higher loan repayments. Small changes now can add up to big payoffs later. 

If you’d like to talk through your personal financial goals with an expert, meet with one of our Lending services specialists today.

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