Here’s how to save $70,000 on your mortgage

Want to save over $70,000 over the life of your mortgage?Money Parents Envelope Method

Maybe that will be easier than you think according to research from RateCity.com.au which revealed if you give up one coffee a day and put the money into your mortgage you could be $71,891 better off over the lifetime of the loan.

Now that’s easier than giving up smashed avocado isn’t it?

What the results show is how much bank customers can save by rolling small amounts into their home loan regularly.

RateCity spokesperson Sally Tindall said most people have no idea how much of an impact extra repayments can have on your mortgage.

“We wanted to show that if you squirrel away a small amount each week, it can knock years off your loan. It’s also something most of us can easily do with very little effort.

“Buying an extra cup of coffee or a bottle of water is often just mindless spending. If you save that money you’ll be shocked by the results.

Key findings:

On a $300K mortgage over 30 years with an average rate of 4.31 per cent.The Top 5 Money Mistakes People Make1

  • Swap drinking $3 bottled water everyday for tap water instead and save $62,266.
  • Give up one $20 bottle of wine and roll the money in your mortgage and save $59,482.
  • Take public transport once a week instead of getting an Uber and save $48,185.
  • Ditch breakfast out once a week and save $59,482.
  • Cut out a six pack of beer and roll the money in your mortgage and save $59,482.

“By making additional mortgage repayments you effectively shorten your loan term – that means you are taking the razor to your interest bill.

“If you can save as little as $20 every week and roll that money into your home loan you could be ahead by $59,482 over 30 years.

“Work out how much you can save each week and set up an automatic bank transfer.  Then forget about it.  The real reward comes with time.

“Paying off a mortgage can seem like climbing a mountain, but there are always simple things you can do to help get ahead,” she said.

IMPACT OF SWAPPING LITTLE LUXURIES FOR EXTRA HOME LOAN REPAYMENTS

 

SAVINGS OVER 10 YEARS SAVINGS OVER 30 YEARS
Cut out 3 coffees a week $6,811 $32,200
Cut out daily coffee $15,891 $71,891
Cut back on 1 bottle of wine per week $12,972 $59,482
Public transport instead of uber, once a week $10,378 $48,185
Swap bottled water for tap water $13,621 $62,266
Have breakfast at home, rather than out, once a week $12,972 $59,482
Bring lunch to work 3 times a week $9,729 $45,319
Cut out 6 pack of beer, once a week $12,972 $59,482
Cut out a case of beer, once a week $32,431 $137,342

 

Notes: 
Savings listed include the money saved from giving up the item listed plus the interest earned / interest charges avoided by investing that money. For example – the total amount saved on your home loan by giving up 3 coffees a week includes the money for the coffee, plus the savings you make from reducing your interest on your home loan every month.
Calculations assume that the interest accrued, the home loan repayments and the additional repayments are applied at the end of the month.
Based on a $300,000 home loan, paying P&I at the average owner occupier rate of 4.31%.
Coffee is $3.50 per cup, water is $3 a bottle, public transport $4 vs Uber $20, breakfast out (minus the cost of eating at home) is $20; bringing lunch of home is a savings of $5 ($10 for lunch out vs $5 to make lunch), six pack of beer is $20, slab of beer is $50.
Note: making additional repayments means your home loan will be repaid before the 30-year mark however for consistency sake we have calculated the monthly savings (with no additional interest) for the remainder of the 30 years.

 



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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