Two Tips To Reduce Your Mortgage Costs

Two Tips to​ Reduce Your Mortgage Costs
Here are two tips to​ help you​ reduce your mortgage costs and by doing so get closer to​ owning the​ entire home you​ live in.
Paying fortnightly instead of​ monthly is​ a​ very smart and very simple way to​ carve a​ decent sized hole in​ your mortgage costs .​
The mathematics are pretty straight forward; as​ we
all know,​ a​ month is​ two fortnights,​ give or​ take a​ bit .​
But there aren't 24 fortnights a​ year; there
are 26 .​
Paying half your monthly repayment every fortnight means,​ in​ effect,​ you​ will make
an extra month's repayment each year .​
You probably won't even notice.
Looking at​ an​ average sized mortgage of​ $200,​000 over 25 years at​ 7.5% .​
The monthly repayment is​ $1478,​ and the​ total interest bill will be $243,​400 .​
If you​ pay half the​ monthly repayment
each fortnight,​ the​ term drops to​ around 21 years and you​ save nearly $54,​515 in​ interest.
When floating interest rates change,​ the​ lender will adjust your monthly repayment to​ reflect
the lower cost of​ interest and to​ ensure the​ loan term remains the​ same .​
If the​ rate goes
down,​ you​ will be required to​ pay less on​ each repayment .​
If you​ elect to​ continue to​ make
the same repayment when the​ rate falls,​ the​ extra will be applied against the​ outstanding
principal owing and you'll save big time!
That $200,​000 mortgage at​ 7.5% will cost $1478 per month to​ repay over 25 years .​
Let's assume that five years into the​ term,​ the​ interest rate drops to​ 6.5% .​
In order to​ still have the​ mortgage repaid over 25 years,​ the​ lender will drop the​ monthly repayment to​ $1369 .​
But if​ you​ kept the​ repayment at​ $1478,​ the​ term would drop to​ 18 years and you​ would save $22,​860 in​ interest.

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