We all know that for most the dream of owning a home in Australia might seem a bit far-fetched, but paying off the home loan in around 10 years? We’ll show you that paying off your debt in just a decade is not only possible, but that paying for up to 30 years is just crazy. With a lot of careful planning, discipline and strategic financial management, it’s achievable. Read on, follow our ten steps and see how much you can achieve as a fellow Australian.
Paying off home loan in 10 years in Australia
So, you’re probably wondering, where should you start. Well, you should always start from yourself. This journey will require a bit of commitment and quite a bit of dedication. To do this, you need strategic financial planning and disciplined execution. This is a goal that can only be reached by those committed to achieving financial freedom. Let’s get started.
Understand your current financial situation
The very first step you need to take in order to pay off your home loan early is to have a clear understanding of your current financial situation. You need to take a look at and understand your income, expenses, debts and assets. The easiest way you can get a clearer understanding of your finances is by creating a budget which outlines all your income and expenses. Make sure everything is included, such as mortgage repayment, groceries, utilities and similar.
Mortgage options review
Take a look at your current mortgage and look for refinance options. We all know that interest rates are fluctuating and refinancing at a lower rate could significantly reduce your current monthly repayment and overall interest costs. You could also consider switching to a home loan that has a shorter term and also consider making extra repayments without suffering from penalties.
Create a realistic repayment plan
Start by creating a repayment plan by taking into account your loan balance, interest rate and desired timeframe. You can use tools such as mortgage calculators to get an estimate on different repayment scenarios and to be able to find a suitable option for your financial situation. By calculating your monthly repayments, you can get a clearer picture on how to achieve your goal.
Prioritise extra repayment
When you decide to add extra money in your account, you reduce the overall interest payable as well as shortening the loan term. To do this, you can add additional income, windfalls or any bonuses to that account as a repayment on your home loan. You could also utilise an offset account or add a direct debit arrangement which will automatically add extra repayments, which will in turn help you avoid temptation to spend the money elsewhere.
Cut down on expenses
Now this should go without saying but we’ll say it anyway. Take a good hard look and find areas where you can cut back on expenses, which in turn will free up funds for the repayment. This includes memberships or subscriptions, discretional spending, luxury items and you could even try to renegotiate certain utility bills. Think of it as redirecting your savings toward acceleration of your journey to a debt-free homeownership.
Increase your income
A surefire way to finish paying off your debt sooner is by increasing your personal income. Do some freelance work, seek career advancement or take up some additional work. That way, all additional earnings can be put toward paying off your home loan faster. Also, If you do get additional income, it’s good practice to reassess your budget to accommodate to any changes that might have appeared in your financial situation.
Utilize a mortgage offset account
Mortgage offset accounts in Australia are a powerful tool to have when it comes to reducing interest payable on your home loan. By depositing savings into this account, you offset the balance of your loan, which in term reduces the interest being charged. If you utilise this account, you can optimise interest savings and even fast-track your journey to a debt free living.
Stay flexible and committed
Like we mentioned earlier, going debt free in around 10 years takes dedication, discipline and flexibility. By staying committed to your repayment plan you need to also be prepared to adapt to changes and circumstances. You should take into account events such as illness, job loss, unforeseen expenses and similar which will require you to re-adjust your strategy. Whatever is thrown your way, keep yourself focused on the ultimate goal of homeownership.
Seek professional advice
Try to consult with a financial advisor or a mortgage broker. These professionals can provide valuable insight and personalized guidance which can help you navigate the complex world of mortgages and real estate. Utilise online tools and seek help online, analyse debt repayment strategies and always make sure you’re making informed decisions.
Celebrate milestones
It’s a good thing to sometimes stop and look back on your progress. Set up milestones and once you reach them, celebrate. It can be anything small or even big, make sure you stay motivated and true to your goal. Celebrate reaching a certain percentage of your repayment goal or maybe a reduction to the loan balance. When a milestone is reached, remind yourself that it can only get better from this point forward.
