Mortgage freedom four years early

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How you might say? I don’t have extra money just laying around to pop into my home loan.

Well, this one surprised me and it takes just a few minutes to set up.

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Switch to fortnightly repayments instead of monthly

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That’s it!

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“OK Baldy man, so how does this help me unchain from the shackles of my mortgage?” I hear you say.

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In two ways:

  1. You’ve made your repayments work harder
  2. You’ve stretched time to make a year have 13 months instead of 12

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Let me explain in more detail:

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Point 1.

Your repayments only reduce the interest you are paying when they have hit the mortgage account. So, the sooner and more often you can repay, the less interest you have to pay.

Rather than accrue interest over a whole month, you now make a repayment after 2 weeks which reduces your balance sooner and therefore reduces the interest you have to pay.

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Point 2. 

There are 12 months in a year = 12 repayments in a year

But there are actually 26 fortnights in a year = 26/2 = 13 monthly repayments in a year (assuming fortnightly payment is half of monthly payment)

So, you’ve actually repaid an extra month’s worth. This makes a big difference over 20-30 years where compounding is concerned.

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Try it for yourself

Run the numbers for yourself in this calculator:

https://www.joust.com.au/calculators/monthly-fortnightly-weekly-repayments-calculator


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