You saved up for your deposit, got a home loan, and finally bought your first home. That honeymoon feeling only lasts so long; now you’re stuck paying off your mortgage.
If the idea of having debt for the next thirty years is stressing you out, don’t worry; you’re not alone. Many people scrimp and save in order to pay off their mortgage sooner.
Everyone wants to own their home sooner so they can focus on more important things, like spending more time with family and retirement.
Trying to pay off your mortgage sooner shouldn’t significantly impact your lifestyle, and it doesn’t have to!
Why Pay Off Your Mortgage Sooner?
Paying off your mortgage early has many benefits, the most important being that it makes sense financially. The sooner you pay off a loan, the less interest on that loan you will have paid.
It’s also a liberating feeling. The sooner you pay off the mortgage, the sooner you own your home outright. You no longer have to worry about making those mortgage payments, and can start allocating your funds to more important things, like family holidays and retirement.
Investing Before You Pay Off Your Mortgage
You may be getting advice from your parents as to how to pay off your mortgage. But the housing market is very different now than it was when they paid off their home.
Firstly, the average age of first homeowners has reached an all-time high. In 2015, the average age of a first homeowner was 37.7 years.
This is very different to our parents, many of whom bought their first homes in their 20s. So, the advice of your parents may not be applicable to you.
Many in the previous generation waited until they paid off their mortgage to begin investing in property. But this is not the best way for younger generations to get ahead.
In actual fact, investing earlier may allow you to see returns sooner, and pay off your mortgage early.
Being in debt isn’t always a bad thing; there is bad debt and good debt. Mortgages on investment properties can be considered good debt.
This is because the value of your investment properties increases over time, which means the debt can be easily taken care of, with no loss, only gain for your part.
How to Pay Off Your Mortgage in 10 Years
By investing in property, you can pay off the mortgage on your home in 10 years instead of 25 or 30. So how do you become debt-free in a fraction of a loan term, save on interest, and turn a profit so you can retire and enjoy your home sooner?
We have discussed how you can pay off your mortgage in one of our Property Workouts of the Day. This is a pretty simple concept to grasp, and can really help you get ahead.
In order to pay off your mortgage in 10 years the old-fashioned way, you would be working under a tight budget, setting aside a substantial amount from your pay cheque to your mortgage repayments.
Instead, we suggest you invest in property. As an example, say your home is worth $500K. By investing another million dollars in two investment properties, you can pay off your home using the profits from these properties in a matter of a decade.
Two well-chosen investment properties should increase in value, usually doubling what they are worth in seven years. But for the sake of this example we’ll say they double in worth in ten years.
The cost of mortgage repayments on your investment properties is taken care of through rental payments and tax incentives. By only paying the interest on your mortgage you can live comfortably during those ten 10 years while you wait for your investments to reach fruition.
If your total loan amount is $1.5 million, and your investment properties have increased in value to a total of $2 million, you can sell your investment properties and use the returns to pay off the mortgage on your home.
You’ll even have a little extra money to invest or put towards your retirement. It’s as simple as that!
Find out more about property investments on the OpenCorp blog, or for more personalised information have a chat with OpenCorp’s team of dedicated property management experts.
