So, Can Ordinary People REALLY Own A Property In 7 Years? Without Living On A Diet Of Instant Noodles?
Can ordinary people own a property in 7 years? Without living on a diet of instant noodles?
The answer is YES. And here are six simple ways to help you achieve it.
1. Take a loan that works hard for you
This is a critical aspect of getting control of your mortgage. Ask yourself:
- Am I getting the best interest rate?
- Am I happy with the facilities offered by the loan?
These days, 100 per cent Offset Home Loans are very popular and for good reasons.
While they don’t always attract the lowest interest rate, their main advantage is that your savings earn interest at the same rate as your mortgage, and that amount is subtracted from the interest payable on your loan. Furthermore, if you have your wages paid directly into your offset account and those funds sit for a few days before you start to spend them, you maximise the interest you’re receiving because it is offset against your home loan interest.
Put plainly, all your money is working for you under this arrangement, which means over the course of several years you can greatly reduce the interest you pay because while the interest is debited at the end of the month, it is actually calculated daily.
The more money you can keep in your Offset account before needing to spend it, the better off you will be in the long term.
2. Get your debts together
By the time you apply for a mortgage, you’ve probably got a student loan, a car loan and a couple of credit cards stacked with spending. If that’s the case, then it’s entirely sensible to consolidate all of your debt into one loan – your mortgage – so that you only have one financial commitment to concentrate on.
If you need to refinance then do so. And, remember it pays to shop around. Lending is a highly competitive business sector – and there are a lot more options than just the big banks to choose from. You will be able to negotiate.
And, speaking of negotiating, ask about extras. Some lenders will be able to offer added benefits such as discounted insurance, or credit cards and accounts without fees. Find out about products and services that could benefit you.
3. Pay more often
It sounds painful, but it’s the right advice if the sound of a 20- or 25- year loan term sounds like a prison sentence.
For example, if you have a monthly repayment, split the total in half and pay it every fortnight. This way, you’ll be paying more over the course of every year (because 26 fortnightly payments during a year equates to 13 months, not 12). You’ll save interest because you are already paying off the loan sooner – courtesy of that extra month each calendar year cycle.
You should also make lump sum payments when you can – instead of spending that tax refund, investment dividend or salary bonus – pay it off your loan. Always pay more if you can. Pay rise? Add a bit extra to your fortnightly mortgage repayments.
4. Make friends with your budget
When you apply for a mortgage you need to provide the lender with an outline of your income and expenses. Use this exercise of putting your real expenses into black and white as a reference to use as time goes on. Knowledge is power when it comes to keeping on top of expenses and conquering your mortgage sooner is best done equipped with as much information and anticipation as possible.
Updating and sticking to a budget will not only help you see where you are leaking cash, (HINT: coffees, takeaway meals, magazines, long lunches and after-work beers can be savings-slashers), but – more importantly – if you end up in a situation where you have unforeseen expenses, you’re better equipped at dealing with them when your money trails are already well-mapped.
5. Use all the tools in the box
Credit cards are the most expensive form of finance, attracting more than 20 per cent interest and often lots of extra fees and charges, too.
However, a credit card can also be a very useful financial tool if you pay the full balance on the card at the end of every month. For example, if you have an offset account (whereby the longer your money sits in your account, the more interest you’re saving on your home loan) then by using your credit card to pay for groceries, entertainment and other bills, you can keep your money in your offset account – untouched – for as long as possible each month.
A credit card can also be a handy way of keeping track of your monthly spending because your bill will detail all of your purchases. Many cards attract points too, which can be converted to retail vouchers, or any number of goods and services that can come in handy when you’re watching your budget.
6. Go hard now to reap benefits later
Right now, home loan rates are at an all-time low, so it’s the perfect time to be chipping away extra hard at the mortgage. Your motto should be: ‘pay the most you can, while you can. This will help you to either build up equity you can use to expand your property portfolio, or enable you to be debt-free, sooner. Either way, you’re on track to a more financially secure future.