Pay off your Mortgage and Reap the Rewards

For most of us, taking out a home loan, will be the largest debt of our lives. Making extra payments against a mortgage may be the difference between owning your own home in your lifetime; instead of the inheritance you leave your offspring. Pay off your mortgage before it’s due and you will reap the rewards. It’s a good feeling, believe me, I’ve been there.

First Home - First mortgage

In the eighties at a time when money was tight, I had a growing family and we were living week to week. I decided to get a part time job, something that wouldn’t interfere too much with my young children. The babysitter was perfect, cheap as well as kind and caring. I worked three hour shifts and put that money aside. After 12 months of solid savings and taking advantage of the first home owner’s grant we had enough for a deposit for a home loan. By now we had a reputation with the bank and were considered a good credit risk. The first mortgage meant we could move in to a comfortable home in the country to raise our children. Because we opted for the rural setting, the cost of the home was much less than the suburbs.

Second Home - Second mortgage

Life is never as we dream. Ten years on, and the partnership with my husband had come to an end. We went our separate ways and dissolved our assets. He kept the family home while I was left with enough collateral to use as a deposit on a place of my own. It was not always easy coming up with the mortgage payments on my sole income but I worked hard and put in extra hours when needed to make sure I could cover the debt.

Third Home - Third mortgage

My new partner and I went out on a limb. We both had other commitments by way of other mortgages, but we felt if we joined together put in some extra effort we could manage the biggest home loan either of us had ever faced. We spent the next ten years, pouring every cent we made into our home. We set up a redraw facility early giving us flexibility and access to additional funds any time we needed them. Those funds were only ever used to increase the value of our property or to take time out for travel to recoup and reenergise.

Fourth Home – No Mortgage

It has taken a little over twenty years but the dream is now reality. The home we live in is ours in every sense. There is no threat from a bank or any other financial lender. No-one can take our dream from us. The bonus comes in the home itself. It is in a dream location with sea views in the front and a national park taking up the rear boundary.

Who could ask for more?

After all those years of paying interest to a bank, I take great delight in depositing our hard earned money and have them pay interest to us.

Am I lucky?

Of course there has been some luck in the venture to own my own home. But the one main feature throughout has been the additional funds paid into our mortgage over the years. Once our equity started to grow there was no turning back. Yes, some of this was due to an increase in property value but most was accredited to the additional funds we were continually paying off the principal.

It is important to have a good understanding of the way debt is managed. Whether it is a personal loan or a mortgage, the more you know about how your repayments effect the outcome the better off you will be in the long term. Creating a financial plan is more than setting up a budget or planning for retirement. Knowledge and commitment is equally important.

Get Advice about Paying your Mortgage

If there are financial terms you are unsure of, do the research. Talk to people who have been trained, financial advisers and banking staff can help you reach your goal. They won’t tell you about the savings that can be made by paying off your mortgage early, unless you ask. Using a mortgage broker may give you access to better loans, easier repayments and lower interest rates.

Beware of Exit Fees and Hidden Charges

Some lenders charge exit fees on mortgages that are repaid early. In Australia, from the 1 July 2010, the Australian Securities and Investment Commission (ASIC) has legislated against any unfair charges in this respect so make sure you know your rights and avoid any nasty surprises.

Paying off your mortgage need not be an unachievable dream. Plan well, learn much and put your knowledge to good use. This message comes to you from a home owner. At this stage of my life I have no commitment and no obligations to money lenders. It is more than a good feeling and I reap the rewards every day.

Copyright © 2011 Karen Wilton