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22 October 2021

How to reduce your mortgage along with your anxiety

BY CANNA CAMPBELL

Having a mortgage can feel like an overwhelming responsibility even at the best of times. However, there are simple tricks we could implement to relieve mortgage-related stress and add more efficiency to reduce your mortgage in a faster timeframe.

The first tip is to have emergency money. Everyone needs emergency money, but the amount differs on a case by case basis for each person. There is no magical one-size-fits all formula. You need to look at your own situation and identify what realistic concerns/situations could impact you and what is the cost of each one – total them up and this will give you an indication of the emergency cash required. Of course, you can consider accrued annual leave, sick leave and any long service leave (which may help you if you need to take extended time off work, for example due to illness or caring responsibilities) as well as any existing emergency money you may have set aside already.

Once you have that emergency money number, gradually build it up through regularly setting some money aside each time you get paid. However, to make sure that this emergency money is utilised most efficiently, these funds could sit in your redraw or offset facility against your home loan, assuming that it is non-deductible debt. It is tempting to make this money more accessible; however, it is generally better in an offset or redraw facility, therefore saving you valuable time and interest against your home loan, than earn a fraction of it in interest, which you then have to pay tax on.

The next step is to look at your budget and see which expenses can be reduced or completely removed to free some extra cash in your budget. This can then be allocated towards making extra regular repayments to your home loan.

As an example, even an extra $100 per month on a $500,000 home loan with an average interest rate of 3% p.a. throughout the life of the loan (on a 25 year term, with extra repayments commencing 3 years into the loan) could save around ten thousand dollars in interest ($10,258) and save valuable time (with the loan potentially being paid off 1 year and 2 months earlier) – the cumulative effects really do add up. Be sure take into consideration any major change such as interest rate rises, using your redraw facility or even refinancing, as this can further impact the amount of time and interest.

Also, any lump sums such as tax refunds, bonuses, or even side hustles should go into the redraw facility or offset account. It may only seem like a small amount and unworthy of your time and energy, but in the long term, this could significantly reduce the years left on your mortgage.

The final step is to track and monitor your progress so that we don’t become deflated without our sacrifices and continued self-discipline. It is important that we be kind to ourselves and realise the progress we are making with our mortgages and how far we have come.

Each month, make a note of your mortgage and the date. Even better, track your mortgage term and see how it is reducing with each extra repayment. Once you see this progress, and the impact you are making, it will spark renewed motivation as you realise your sacrifices contributed to long-term financial improvement. You will feel more empowered as you realise the power you hold in becoming mortgage free sooner.

Ready to get started? Got your notepad ready? Grill our home loan specialists with all the right questions.
Call us on 1800 100 258.

Canna is the founder of the financial media platform, SugarmammaTV, and author of financial advice books The $1000 Project and Mindful Money. She comes from a corporate finance background and is a licensed financial planner. SugarmammaTV provides educational content that helps make money and finance more approachable. She is also the founder and director of financial planning firm, SASS Financial Services.




This article was prepared in partnership with ING. The information provided in this article is of a general nature only and does not consider your personal objectives, financial situation or particular needs. The views expressed in this article are provided independently by Canna Campbell, a Financial Planner and an Authorised Representative of Wealthstream Financial Group Pty Ltd (AR 000309372) featured in the article. ING makes no warranty as to the accuracy, completeness or reliability of the information, nor does ING accept any liability or responsibility arising in any way from omissions or errors contained in the content. ING does not recommend any products, services or financial strategies mentioned in this article. ING strongly recommends that you obtain independent advice before you act on the content. Canna Campbell uses ING’s trademarks under arrangement with ING. ING is a business name of ING Bank (Australia) Limited, ABN 24 000 893 292, AFSL and Australian credit licence 229823.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

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