Ideas to Reduce your Mortgage Faster

Making larger or more regular repayments on your loan is one of the best ways to reduce your mortgage, simple but true. Those spare funds will come from money that would otherwise go towards non-essentials. Quantifying what those repayments can mean long term will give you the incentive to move forward, so we're going to show you how mere pocket change can transform into thousands of dollars in savings.

Turning loose change into thousands

Becoming more aware of your ability and desire to make the necessary sacrifices becomes easier when you can quantify just what you are going to get in return for deferring consumption. When it comes to reducing a mortgage, a bit of self-reflection can go a long way. Just how much do you ?need? that daily cup of coffee? Or that nightly dose of Foxtel? Or that fancy dinner out each week?

Think of the cup of coffee you have each day on your way to work. You can consume it right away, get a great buzz, and it's gone in a couple of hours. Now, think about that coffee and what it's worth to you. That daily coffee works out to $15 per week, or $65 per month. If you were to put that amount into a $500,000 mortgage on top of your regular payments each month, you?d save $82,638 and take two years off your loan. That is equivalent to earning $154,465 before tax (assuming a tax rate of 46.5%). Over $150,000 earned for simply putting aside a small amount each week.

You may not decide to kick your coffee habit, but at the very least, this exercise might help you savour that daily cup of coffee one bit more!

The real value of this exercise is that it shows what seemingly small amounts of excess money can do when they are fed into your mortgage on a regular basis. It's the power of compounding in action, so the sooner you begin to channel any additional funds in the mortgage, the larger the rewards.

Paying off a mortgage is at least a 20-year journey in most cases (although it doesn't have to be), so depriving yourself of things which you cherish is not the answer. Understand though that small sacrifices can be powerful over the long term, and with that in mind, dig deep inside and think about what sort of lasting changes you think you can make.