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By Karren Smith
Special to the Financial Independence Hub
Owning a home without a mortgage is something of a dream for many, and an important step in financial independence. Paying off a mortgage in 10 years can seem like a massive task, but with some simple financial strategies and planning, it’s possible.
While you will need to make some sacrifices, the benefits of owning your home as soon as possible is worth it for many people. By paying off your loan more quickly, you and your family will save thousands of dollars in interest and have more money to put towards the things you love, such as overseas travel, or perhaps a second home for holidays. Owning your house can help your life become freer and more flexible. So how can you escape the shackles of your mortgage and pay off your home in 10 years?
Create a simple plan
Assuming you’re debt free, aside from your mortgage, you can make a simple plan that will help you pay off your home within 10 years. For example, let’s say you have a $300,000 loan at a 5% interest rate. If you have a single income of $95,000, you can pay off your loan in 6-7 years with $2,000 fortnightly payments.
If you’re a couple, with an income of $140,000, you can pay your mortgage off in 5-6 years with $2,600 fortnightly payments.
Of course, these numbers are just a starting point to illustrate what’s possible if you focus on paying your home off. Bigger loans will require more time or bigger repayments. Obviously, the higher your fortnightly payments are, the more quickly you’ll pay off your loan; however, at the same time, it’s important that you have enough money to cover your expenses and live comfortably.
To find the best way to pay off your mortgage quickly is surprisingly simple. Firstly, you must know how much you earn, and how much your mortgage is. Then, you simply use a mortgage repayment calculator, like the one offered by HashChing, to find what repayments you have to make to pay off the loan in your time frame.
Make high (and automatic) repayments
It sounds simple but there’s no way around it. The more you put towards your repayments, the faster you will pay off your loan and the more you will save on interest. No matter how detailed your plan is, if you’re not consistently making decent repayments on your mortgage, the life of the loan will increase dramatically.
This is where you will have to make some sacrifices. Find every way you can to save more and put the extra savings towards your home loan. This might mean you cancel your gym membership and choose to eat out only once a month. Alternatively, you could find a way to generate a secondary income, which is easier than ever with the sharing economy and gig-type jobs. However you choose to do it, it’s important to put as much of your income as possible towards your repayments.
Once you know how much you can repay every fortnight, it’s wise to set it up as an automatic payment. This way you can chip away at your mortgage without even having to think about it. While you’re paying off your home loan as effective as possible, you can continue to live life without constantly thinking about the next repayment.
It’s also important to remember to continue saving and finding more income. The more you can cut costs, the more you can put towards your repayments and the sooner you will pay off your mortgage. Living simply and putting most of your paycheque towards your mortgage will see the most efficient results.
Keep the end goal in mind
Whether you choose to pay off the loan over 10 years, with more cash for expenses, or aggressively pay off your loan in 5 years while living frugally, it will always take several years of consistent motivation.
The best way to stay on track is to find out exactly why you’re trying to pay off your mortgage in under 10 years. Turn this into a mantra and keep it in sight. Keep your goal in mind and fall in love with tracking your progress. The more motivated you are, the easier it will be to stick to your plan and make those repayments, without being tempted to spend your money elsewhere.
Paying off your mortgage in 10 years isn’t impossible. Rather, with a simple plan and a lot of commitment, almost anyone with a typical income can pay off their home in 10 years. This lifestyle isn’t for everyone, and others may find more benefit in investing their money elsewhere. However, owning your home debt free can bring your life a level of financial freedom that’s hard to achieve any other way.
Karren Smith is a content writer at HashChing, Australia’s first marketplace for home loans. HashChing connects you directly to partnered mortgage brokers who can negotiate a better rate from the lenders. Karen has always had an interest in finance and loves being able to combine this with her love of writing.
