Great time to pay off your mortgage faster

Low rates payoff sooner

“The present low rates are the gift that keeps on giving” Noel Whittaker

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. Noel says borrowers now should be celebrating the fact that they’ve got a once-in-a-lifetime chance to really make a dent in that mortgage.

So what do you do if you’ve got a home mortgage now?  Firstly, you need to understand the way numbers work.

For example, if Jack and Jill have a $400,000 mortgage at 5% they are repaying at $2,148 a month over 30 years, the interest over the life of the loan would be a staggering $373,000 even at such a low rate.

If rates rose to 8% they would have to increase their payments to $2,936 a month to maintain their 30-year term. Even if they could manage to do this, they would end up paying $656,000 in interest which is 50 per cent more than they borrowed.

However, if they were financially savvy they could pretend interest rates were at 8% now and repay $2,936 a month. If rates stayed at 5% they would cut the loan to 17 years and save $181,000 in interest.

Not only have they given themselves the potential to save a small fortune, they’ve also given themselves a valuable safety buffer if interest rates start to rise even higher.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.

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