Katrina Bart and her husband Chris are living the dream.
Two years ago, straddled with mortgages on a terrace, an investment property, a company and a boat, the couple decided to get rid of all their mortgage debts for a better lifestyle.
“We were living in Newcastle, when we decided it was now or never,” says 53-year-old Katrina.
“We literally sold everything and moved to the Gold Coast. We purchased a home in Brisbane for $620,000, along with a campervan and put the rest into superannuation.”
Before the major decision, the couple ran their own business and holidays were rare.
“Being self-employed, more often than not, we worked through Christmas. It's one of those things where you're too busy to take holidays and then when you're not busy, you can't afford to!”
Tired of the long hours they knew it was time for a change.
“We just wanted to be able to kick back a bit. We haven’t stopped working completely; we work remotely now and earn enough to allow us to do whatever we want.”
The solution was to downsize and get rid of the mortgage. They found they could live with less.
“I didn’t need lots of shoes and clothes nor that great big house. If you're able to downsize and reduce your mortgage, put every spare penny into it. The sooner that you pay it off, the sooner you’ll have freedom you only dreamed about.”
They have also learnt to only purchase what they need.
“We still enjoy life doing things that are 'free' such as picnics etc. Don't wait for the day you'll hope to pay off your mortgage; just in time for your retirement, try and get that retirement age early.”
The couple said the best thing about paying off early was no more stress.
“Selling up removed so much stress from our lives that we didn't even realise we were carrying. We still watch our spending but there's just this weird sense when you don't have to worry about interest rates or the monthly mortgage.”
With every item sold, freedom came. “Each time something sold there was this little weight that lifted off us and then at the end when we realised we no longer owed money to any bank, we were like, ‘Woo hoo!’”
“Unless you’ve experienced being mortgage free, you don't understand how bloody good it is! We’re incredibly happy. It’s one of the best things we ever did.”
How to pay off your mortgage faster
Property expert and mortgage broker, Jane Slack-Smith provides the following tips to pay your mortgage off faster.
THE GOLDEN GOOSE, the 100 per cent offset accounts: Not only save you interest in the long term, but you get rewarded with the ‘earnings’ of these funds.
PAY MORE: Extra repayments are the easiest way to pay off your loan sooner. The more you contribute the quicker you pay off your loan and the less interest you pay overall.
IN YOUR INTEREST: Assess lower interest rates carefully and be mindful of special offers with hidden fees.
OPT UP: If you do find a cheaper rate or if given the option of taking up lower repayments based on lowering interest rates - keep the higher mortgage repayment you are used to paying. You won’t even notice it.
HALVE IT: Change your repayments to fortnightly to pay off faster.
SLICE IT: Consider taking a shorter term loan, perhaps 25 or even 20 years – it will mean you are making higher repayments but you will end up paying less interest.
BEWARE OF HONEYMOON RATES: Or initial rates that are super cheap, these often revert to a higher rate after the first year and end up costing more in the long term and delaying you from paying off the loan.
PACKAGE IT UP: Almost anyone borrowing over $150,000 qualifies for a professional package. These usually come with a reduced rate, a fee free credit card, which can be auto paid every month, fee free savings accounts and the golden goose - an offset account. Expect to pay about $300 a year for the package but it is well worth it.
MAKE THE GOLDEN GOOSE LAY: One way to optimise your offset account is to have the most money possible each month sitting in your account offsetting your interest repayment which is calculated daily. For the super disciplined person this involves putting everything on the credit card, keeping all your cash in your account for the maximum time as possible. Then once a month clear your credit card, pay no interest and get maximum benefit from your offset.
DON’T PAY A LOYALTY TAX. Keep up to date on your interest rate and lender offerings. Check your mortgage every year; reach out to your mortgage broker to check whether you’re not paying a ‘loyalty tax’.
DOWNSIZE: On average, Australians stay in their homes for about 9-12 years. If your current home is worth $800,000 in 10 years and you ‘only’ have $100,000 to pay it off to get to your goal of living in a debt free home, then consider trading your old home for a new cheaper home.
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