How You Can Create a Mortgage-Free Life – Five Tips for Repaying Your Mortgage Faster

Dominique Grubisa
Dominique Grubisa

Published 3:53 am 29 Feb 2020

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What would you give for a mortgage-free life? In this article, DG Institute CEO Dominique Grubisa shows you how to eliminate mortgage debt quicker.

Your mortgage is probably the biggest debt you will ever have. In Australia, it’s typically hundreds of thousands of dollars’ worth of debt that will stay with you for decades.

Every month, you make the mortgage repayments, all the while dreaming of a mortgage-free life. Unfortunately, that dream doesn’t seem like it’s going to come true any time soon. And worse yet, the pressure of the mortgage, combined with your other expenses, can leave you in a difficult position.

That kind of mortgage stress is a reality for thousands of Australian families. A recent survey by Digital Finance Analytics shows the scale of the mortgage stress problem. It looked at the financial positions of Australian households in October 2019. 

And the conclusion it reached is terrifying, as reported by Your Mortgage:

“The results of the survey revealed that a further 70,000 households fell into stress [in October 2019], pushing the total to 1.7m, or 32.2% of the population.”

A third of Australian households struggle with paying off mortgage debt!

Those figures might make the prospect of living a mortgage-free life seem even less attainable. However, they also show us the benefits of no mortgage. Without a mortgage, you don’t have to worry about dealing with the financial stress that millions of Australians live with.

So, that brings us to a key question…

Is living without a mortgage possible?

If you follow these tips, you’ll put yourself on the fast track to creating a mortgage-free life.

Tip #1 – Sacrifice the Things You Don’t Need

Just take a moment to think about all the unnecessary expenditures in your life.

Maybe you eat out a couple of times per week. Or you go to the cinema often and spend a lot of money on entertainment. You may have subscriptions to a host of streaming services or pay money for a gym membership you barely use.

You may buy expensive clothes and never stray away from name-brand foods.

These are all things that you don’t really need. They’re just things that are nice to have.

If you stop spending money on this kind of stuff, you’ll save hundreds of dollars every month. All of that money can go to making extra repayments on your mortgage. And because you’ve already handled the main repayment, every dollar of those extra payments goes towards the loan’s principal.

Remember that you can enjoy all of those things later, when you’re living a mortgage-free life

Avoid collection agencies

Tip #2 – List All Your Debts (And Repay the Most Expensive Ones First)

Your mortgage may be your biggest debt. But it’s probably not the only one you have. So many people fall into mortgage stress because they have a lot of other debts to worry about.

Your goal is to clear everything you can as quickly as possible.

Make a list of all of your debts. Prioritise those that have the highest interest rates attached to them. Get them repaid. And then dedicate the money you’re saving to extra mortgage repayments.

Debt Recovery

Debt Recovery

Tip #3 – Make Your Repayments Automatic

When you make mortgage payments manually, you’re always left with a tangible sense of losing money. Because of this, you may feel hesitant about paying any extra towards the mortgage. After all, you just physically watched hundreds of dollars leave your account.

That’s why it’s a good idea to automate the process.

Set up a specific account for your mortgage and have the payments deducted automatically.

But here’s the really important part… 

Make your automatic repayments higher than they need to be. You don’t have to do this by much. For example, you could set the repayment to $50 higher than the minimum. That will result in $600 more paid off the principal of the loan each year. And because you’ve automated the payments, you’re not going to miss that $50 as much as if you’d handed it over manually.

Tip #4 – Consider Creating a Mortgage Offset Account

An offset account strategy can help you attack your mortgage’s principal even faster.

Offset accounts are savings accounts attached to your mortgage. When you put money into the account, your lender will deduct the amount from the loan’s principal. For example, let’s say you have a principal of $400,000. If you put $50,000 into an offset account, that principal falls to $350,000.

The key here is that you only pay interest on the reduced amount. That means your savings account actively helps you repay your loan faster, even if you keep the monthly repayment amount the same.

Of course, taking money out of the offset account raises the principal again. Still, it’s a great option for those who have a lot of savings that are currently just sitting in a savings account. The amount the money helps you save in interest payments usually exceeds the amount it accrues in interest.

Tip #5 – Forgive Yourself When You Mess Up

By now, you should have a plan in mind for creating your mortgage-free life. You just need to remember one thing…

Nobody’s perfect.

You will likely make mistakes along the way. For example, you may make an impulse purchase that stops you from making extra repayments for one month.

Just remember that these mistakes can’t derail you if you don’t let them.

See them as the little slip-ups they are and forgive yourself for them. This ensures that they don’t create the sense of guilt that could lead to you giving up on your early repayment efforts.

If You’re in Debt

Being in debt places you into a precarious financial situation which can quickly snowball into a catastrophe.

One of the clients at DGI Debt Management was a business owner and the primary provider for his family, when the pandemic hit and dramatically reduced his income. In order to continue paying his bills and putting food on the table, he began to take on more debt than he could afford and quickly found himself with $20,642 in debt.

The Debt Management team was able to reduce his debt down to just $3,759, cutting 82% of his total debt off and giving him the breathing room he needed to get back on his feet.

On top of that, he no longer had to worry about the possibility of bankruptcy, or having to deal with creditors anymore.

To find out if the Debt Management team can improve your debt situation, visit DGI Debt Management today.

Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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