Sunday, August 26, 2012

Pay off your Mortgage in 6 years and save $300k + in interest repayments!


Mike and Jenny Jones (DINK’s) (Double Income no Kids) came to Liquidity Finance to see how they could pay off their home loan sooner.  They both worked hard, had relatively high disposable incomes, but for some reason always barely came out, without much to show at the end of each month!
“It seems that the more we earn, the more we spend!” said Jenny.

Sandra (Australia’s premier mortgage broker at Liquidity Finance) , together with Myles (a financial planner with Ark Total Wealth), went through a planning exercise with them, developed a strategy enabling them to pay off their home loan in 6 years, saving 19 years off their home loan payments and $306,241.26 in interest payments (non-deductable or “bad- debt”) without taking any risks.
A few key strategies enabled this to happen:-
1. A mortgage refinance from $400k to $430k paying off the credit card debt and car loans.
2. Interest rate reduction from 6.75% to 5.82%
3. On refinancing, the first repayment was made as soon as the loan was settled (saving $9,000 interest and 4 months off the loan)
4. Paying fortnightly instead of monthly… making 2 extra payments per annum, saving $86,000 and 4 years off the mortgage.
5. Expenses being paid by credit card (getting frequent flyer points for holidays) and your salary going to an offset account (reducing your loan balance when it comes to calculating your interest owed.) A direct debit facility was set up to pay their credit cards in full at the end of each month.
6. A budgeting exercise making Mike and Jenny aware on their day to day expenditure. A little “tightening of the belt” resulted in them being debt frree in 6 years!!


Mike and Jenny now have substantial equity in their home. “This has come in handy, and we are now focussing on building our wealth with a strong capital base.” Thanks Sandra and Myles!

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