For most people, the single greatest liability they will ever own is the home they live in. Most first home buyers find themselves laden with mortgage debts and struggle to even dent the principle of their home loan and merely cover interest costs for several years. Over time, the total amount of mortgage debt really stacks up.

Fortunately, there are a number of ways to not only pay off your mortgage sooner but also reducing the total amount of money you have to repay.

In essence, reducing mortgage debts is enabled by increasing the amount and frequency of your repayments. Additionally, there may be ways to take advantage of lower interest rates in order to reduce the total amount of debt that needs to be repaid.

Methods of Mortgage Debt Reduction

Mortgage Reduction Strategies

By increasing the frequency of your mortgage repayments, for example weekly or fortnightly instead of monthly, you will be reducing the average daily balance of your mortgage throughout the year even though the total amount of repayments is the same.

If you increase the amount of each mortgage repayment you make you will be reducing the principal of the loan as well as the interest associated with it. The longer you take to pay off a loan of any kind, the more you will end up paying in interest.

Mortgage refinancing is another way of reducing mortgage debts. To put it simply, this involves taking out a second mortgage at a lower rate of interest than the original mortgage. You can then use the money from the new loan to pay off the old one. You’ll still have to repay the new mortgage but there will be less interest to pay off.

A somewhat riskier method of juggling interest rates is to pay off the majority of your living expenses with a credit card. As long as you can afford to repay the credit card debt within the interest free period you can allocate your own funds to minimise the average daily amount of your mortgage.

These approaches will usually apply to reducing the non tax deductible debt on your home property but can also apply to investment properties.

Contact us for debt reduction strategies and debt reduction advice to reduce your mortgage and save.

Many people “believe” that property prices fall as interest rates increase. This belief is at times warranted due to the emotion that property should drop when interest rates increase, coupled with a very short term drop in auction clearance rates.

We look at the basic reason why interest rates are increased by the Reserve Bank of Australia (RBA) and overlay this with business self-assurance and past property price performances, we come to a very different conclusion.

Why does the RBA raise the cash rate? Increased expenditure is the answer. This increased spending is not only from business, but from the mums and dads spending more on holidays, clothes, car, whitegoods and renovations.

Inflation starts to kick in when the financial system picks up. Inflation means increases in the price of goods, services and assets. Yes, your clothing will cost more to buy, that hair cut will cost more next month, the holiday will cost more than last year’s, your shares will increase in value and the biggest asset that most Australians rely on for wealth (their home) increases in value.

When interest rates amplify, property prices typically don’t fall. As we saw towards the end of last year, property prices had already begun an upward climb before the interest rates started increasing. When the RBA says there are more increases to come, what do you think astute investors are doing? Ask to top 1% of wealthy retirees what they did many years ago … They bought and held residential property!

The last chance to make good assets growth through suburban residential property investments for the ageing baby boomers and the start of a possessions love affair for Gen X and Y is within the next 8 to 10 years to come.

In the mid 70’s, late 80’s and early 2000’s when interest rates started to increase and entered double digit figures, evaluate what was happening with property prices at the same time, you will notice that interest rate hikes coincided with investment property prices and home prices going through the roof.

Will the past repeat itself? Only the future will tell.

Peter Morris
“Making Property Investing Easy!”
S.E.QLD. Investment Property