Two simple ways to take 10 years off your mortgage

When you first eyeball your mortgage it can seem scary. You’re borrowing a hell of a lot of money and the realisation dawns that it might take 25 years to pay off.

First up, don't stretch yourself too far. Work your budget on making repayments based on an 8.50% interest rate even if your actual rate is below 6%. That way you pay it off faster from the start. If you set up your repayments at this sort of level then it is essentially "fixed for life." Fixed in the sense that your repayments will never need to change if mortgage rates go up. I've laboured on this first point quite a bit in recent posts.

My second point is a newbie! Feed half of any salary increases to the mortgage. This is so simple and painless because it is never money you enjoyed anyway. Wage inflation is typically running at about 3%. That said, as we get older and more experienced chances are it will increase faster than this. So if every year we give up 50% of any wage increase to the mortgage, the life of a 25 year mortgage drops to 16 years. I think almost all homeowners could pay off their mortgage in less than 15 years, it just requires a bit of planning and action.

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