New Year Financial Health Check

A new year sets us off with good intentions of doing better this year. We’ll eat less, exercise more, we’ll get on top of our finances. While we’re not much help when it comes to the diet and exercise, we can help you get on top of what is normally your biggest financial commitment – your mortgage. Paying off your home loan quicker is one of the best ways to create financial freedom so that you can start putting your money towards your other big goals and dreams.


We often hear in the media how if we just gave up buying a coffee each week, packed our lunch or gave up takeaways we could be making a significant dent in our mortgage. But how do we actually make that sacrifice pay off and get to see the difference to make it all worthwhile?


If we assume that by forgoing buying a few coffees and lunches you manage to save an extra $50 a week, how would that impact on your mortgage?


Mortgage:                                           $300,000

Interest rate:                                       4.5%

Term of loan:                                      30 years

Fortnightly payments:                        $701


If you can pay an extra $100 off your mortgage a fortnight then you will save over $63,000 on the total cost of your mortgage and knock 6 years off the term.  You have to admit that, that makes the sacrifice seem worthwhile.


Unfortunately in Auckland a $300,000 mortgage may seem like a dream for many and just making the required payments is a struggle. So how else can you get ahead on your mortgage?

Refinancing to take advantage of some of the sharp one year fixed rates, while maintaining your current level of payments may be a good option.  If you could achieve a .25% drop on your interest rate and maintain your current level of payments you could knock a year off your mortgage and save $30,0000.

Mortgage:                                           $300,000

Interest rate:                                       4.25%

Fortnightly payments:                        $701


With a saving like that, it could be a good idea to give your Eightfold advisor a call to check whether you could benefit from this saving without incurring any break fees.

Just think if you could combine refinancing at a lower rate and paying an extra $100 a fortnight you could save over $80,000 over the life of your mortgage and knock seven years off the term – now that is some serious savings!


The structure of your loan can also help you pay it off faster – if you are disciplined.

Revolving credit or off-set mortgages allow you to offset your funds against your daily interest which should minimise the amount of interest you pay. The danger being, that the funds are still available in your account and it can therefore be tempting to dip back into them to fund a renovation, holiday or new car.

If you are on a floating rate, including a revolving credit/off-set mortgage, you are also able to make additional lump sum payments without incurring any break fees.

So while there are many benefits of being on a floating rate, there are some very sharp deals to be had on short term fixed rates which may also suit your needs.

The best option to establish what is going to work for you, is to have a chat with your Eightfold advisor and they will help work out the best way to structure your mortgage to get ahead.


Keys to success:

The first step in making a plan to get rid of your mortgage quicker is to understand your loan agreement with your bank.

  • Are you on a fixed rate?
  • If so, when does it expire?
  • Is there any facility within your loan agreement to make extra regular or one off payments?

Your Eightfold advisor, can work through this with you and help you understand the best strategies to get on top of your mortgage.


Keeping on track:

Now while it seems logical to give up the café coffee or to make the effort to pack a lunch we all know as we get further into the year it gets harder to maintain that motivation.

Eightfold provides a calculator on our website that allows you to see the benefit of extra regular or lump sum payments on your mortgage. However if you want to keep a running tally at your fingertips, then you may want to look at one of the many mortgage tracking apps that you can install on your phone or tablet.  These include

  • Mortgage Payment Calculator – looks pretty good I think!
  • Mortgage calculator plus – good for working out impact of extra payments
  • Mortgage Payoff Tracker – allows you add extra payments made to see benefit – can’t seem to add in a continuous payment as far as I can work out


If you’re serious about taking control of your mortgage and getting it paid off faster, give you Eightfold advisor a call on 0800 881 886 and we can help you make a plan to achieve your financial freedom.

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