If you're an Auckland homeowner working on a mortgage, we probably don't need to tell you how difficult managing your repayments can be. With average values in the Auckland market growing by 12.2 per cent in 2016, tipping over the $1 million mark according to QV, paying off a mortgage certainly isn't getting any easier.
In our latest video, John Bolton, chief Squirrel and purveyor of excellent mortgage advice, delves into strategies to take control of your mortgage by focusing on incremental successes:
As JB mentions, mortgages across Auckland are only getting bigger and some people may be asking themselves how they can keep up with their repayments. While house prices continue to rise at 10 per cent per year or higher, the temptation can be to worry about repayment strategies next year, or the year after or five years down the line. A mortgage of several hundred thousand dollars is a huge commitment, but strong capital growth makes the challenges worthwhile.
Regardless of how quickly the value of your assets is rising, working out a plan to pay off your mortgage sooner is simply a smart strategy for homeowners. When the rapid growth inevitably cools, an outstanding balance a few thousand lower than if you had been just doing the bare minimum will be much easier to manage over the long term.That said, logically house prices won't continue to escalate at this rate, and while there are always going to be good opportunities to make fast gains in Auckland for those who know where to look, average prices across the board will likely stabilise at some point.
Looking at your mortgage in its entirety can be daunting - that single figure of several hundred thousand may seem insurmountable and quickly lead to financial stress. Rather than agonising over the total, however, JB suggests breaking your mortgage into "bite-sized" segments can result in a repayment schedule based on regular achievement and renewed motivation.
After all, separating out increments - perhaps of $50k, $60k or $70k - and working towards that can make your repayment progress seem much more tangible. Setting these reduced targets and mapping out a strategy to pay them off not only means you will be achieving goals with much greater frequency, but each time you meet a target it can be a huge motivating factor.
While there is a range of more complicated means of speeding up your mortgage repayments, the relatively simple trick of setting achievable short-term goals and focusing on them promotes greater satisfaction and the positive reinforcement required for mortgage holders. Don't be daunted by the big picture - allow yourself the sense of achievement from chipping away at the total sum.
There's no argument that paying off a mortgage in Auckland - or anywhere in New Zealand, for that matter - can be challenging, and even the most astute borrower is going to have peaks and valleys in their homeowning journey. However, with some creativity in your repayment strategy, the path towards hitting that target can be faster, less stressful and more satisfying.
The team at Squirrel has helped thousands of New Zealanders make smart property decisions, and guided many towards significant time and money savings on their mortgages. If you're finding yourself struggling to stay motivated with your repayment strategy, or are looking at refinancing an existing mortgage or getting started on a new one, give us a call today.