The New Year is a terrific time to set some sensible financial goals, such as paying off the mortgage faster. But don't go crazy. Be sure to set small, realistic goals that will help you work toward your larger targets.  

Make budgeting your number one resolution

If you don't have a budget, you should develop one to help you get control of your finances. On the surface, it might sound a bit materialistic, but if you don't have control of your finances, then the stress created can affect your health and happiness. 

I'm sure we have all had periods where we were living hand to mouth, and we wondered how we were going to pay the rent or buy some groceries. Budgets can relieve this stress by giving us a plan to make choices, and in turn, you will feel happier and make better decisions about what you eat and drink and how you exercise, and ultimately you will feel healthier and happier. 

So, having a budget could be the cornerstone of your personal development and set you up for a fantastic 2021, and better still you might even discover some savings that you can throw at paying off the mortgage faster.

Reassess your mortgage payments 

Reassessing mortgage payments will be addressed as part of your budgeting and ultimately, you should set goals around what you can afford to pay now and over the next five or ten years. 

As a mortgage broker, I work with people at different stages of life. So, I’m well aware that the options to save for a single income couple with two young children may be vastly different from a couple with two incomes and no dependents. Yet what we all share is a primary goal to pay down debt. 

One of the best ways to pay down debt but keep some cash for emergencies is by setting up a 'mortgage offset account'. An offset account is a savings account linked to your home loan. This mortgage facility could help reduce the amount of interest you pay on your loan and help you pay it off faster. The more money you have in your offset account, the less interest you'll pay.

Whether you have an offset or not, make sure you have the cheapest loan structure, interest rates fee and options. Make additional payments if you can and redraw the funds if you need some cash for an unexpected expense. But aim to be rational and flexible about your mortgage and don't let it rule your life or impact your wellbeing.  

I also recommend that borrowers try and set themselves achievable targets such as: "I want to pay the mortgage down to $xx in the next 12 months.". Then re-evaluate the goal in 12 months and be sure to reward yourself for your achievements.

Resolve to refinance the mortgage

With many lenders now offering home loans under 2%, there has never been a better time to refinance. Apart from record low-interest rates, the lenders are offering cash incentives that make refinancing a no brainer – and even if you are currently in a fixed rate and you need to pay break costs. By securing a cheaper interest rate, you'll be in a stronger position to pay down your mortgage debt faster.

Set up an emergency fund

We should all have an emergency fund or a cash buffer to cover our ongoing expenses. If there is one thing that 2020 and COVID-19 have taught us, it's that having a cash buffer is a sensible strategy in the event of a job loss, or our business takes a hit. When it comes to calculating how much cash should be parked in the emergency fund, my general rule is that it's best to aim for between three to six months of funds to cover living costs. Knowing you have some funds in reserve will help you sleep at night.

Other factors to consider when building an emergency fund would be the length of time you could survive without an income, how quickly you'll return to the workforce and your living costs during this period. If you have an offset account, income or loan protection insurance be sure to include these buffers in your calculations, as well as sickness and accident insurances. 

To help you achieve your mortgage goals in 2020, be sure to contact Our Broker today on 1800 913 677.