Page 57 - Smart Money

Smart Money

If you want to pay off your mortgage quicker, as I said, arrange with your
bank to make a higher repayment than what is required. That will give
you that financial freedom earlier, so you won’t have to pay the mortgage
off over 30 years. You will build equity quicker, and you won’t notice the
difference because you have always done it this way.

You could also utilise an off-set account. All your savings go into the offset
account. Every day that the money is sitting there, it is offsetting your
mortgage. Generally, you must have a minimum of $1,000 or $2,000 in
the offset account, but some banks have no minimum. Using this feature
could reduce your loan term and the amount of interest you will pay.

You can also make all your payments on your credit card, leave all your
money in your offset/savings account, and then every month, get the
bank to do a sweep and pay off the credit card in full with the money that
is in your offset/savings account. Doing all of these things will get you
ahead much quicker. It works this way:

Key Point
Interest is calculated daily and charged to your account monthly. So
every day that the money is sitting in your savings account it is off -
setting your mortgage. By having your pay come in on the 1st of the
month and leaving it in your offset account all month while you pay for

things on a credit card, for those 30 days you are offsetting the interest
by that amount, but not accruing any interest on the credit card. Credit
cards usually have an interest-free period of 55 days. If you pay it off
every 30 days, there is no interest charged.

Obviously, the more you earn, the more impact this is going to have, but
it could probably reduce the term of a home loan by 5 or 10 years. That’s
how I paid off my house.
Another way to get ahead faster is to pay the principal and interest instead
of interest only. With an interest only loan of 5 years, in 5 years’ time
you are still going to owe the same amount of money, because all you are