Monday, 22 February 2016

40 Ways on How to Reduce your Mortgage & How to Pay your Mortgage Faster


  1. Live in an affordable home. What is affordable? One of the many rules says that approximately 30% of your income should be mortgage repayment.
  2. Rent out your couch, rooms, garages, lawn (for granny flat), basement etc.
    1. To rent out your house’s car park: parkshare.com.au, parkhound.com.au
    2. To rent out your apartment’s car park: put up notices in your office’s notice boards, building’s notice boards, etc.
If you live close to a University, list it on the University webpage (call the administrator and ask - don’t muck around with the website, be time efficient).
  1. Live in the cheapest spot in your home and rent out the majority of the home.
  2. Living closer to the City and/or top University/High School could be more expensive initially, however it will make your property to be much more attractive (easier) to rent out to future tenants.
  3. Be a homestay parent.
  4. Renting out to students and providing them meals including utilities & internet, may command higher rental rate than renting room only.
  5. Be a guardian to international students will command an even higher rental return.
  6. Be a guardian plus tutor to school aged international students will command an even higher(!) rental returns.
  7. If you have skills to work at home as a freelancer, for example: IT Consultant, Bookkeeper, Tax Accountant, Piano teacher, tutors, etc, and you do work at home, you may be able to claim home office expenses (part of your mortgage, utilities, internet, depreciation expenses of your work furniture - check ato.gov.au for more information). This may reduce your taxable income, your mortgage and home office expenses, and as the result may increase your savings and pay off your mortgage faster.
  8. If you do work at home, do this too (on top of doing number 9):
    1. Dog sitting
    2. Baby sitting (be aware of the rules & regulations applicable in your state)
  9. Fully utilize your yard/garden/garage
    1. Grow your fruits and vegetables for personal consumption, sell on farmer’s market, barter with friends and neighbours.
    2. Whilst cleaning your own (gutter and garden), do clean your neighbour’s as a barter or for $$.
    3. Conduct yearly garage/yard sale.
    4. Put a granny flat, and rent it out
    5. Build an extension of bedroom or bedroom with on-suite, and rent it out.
  10. Look for cheapest mortgage rate.
  11. Have a perfect credit score, you can have higher bargaining power.
  12. Never pay mortgage repayment late - again, this is your bargaining power to lower your mortgage rate.
  13. Don’t use a mortgage broker, if your loan is simple enough, you can do it on your own
  14. Online mortgage account usually offer better deals - lower mortgage rate.
  15. If you think the interest rate is going to go up, lock into a fixed rate.
  16. Avoid locking yourself into a fixed rate for more than half of property cycle, that means around 3-4 calendar years.
  17. Put all of your money into your offset account, instead of in saving account
  18. Pay your mortgage weekly.
  19. When refinancing for lower interest rate, incorporate the refinancing fees against the money saved on reduced home loan repayments.
  20. Before you buy your home, get insurance quotes.
  21. Start your home insurance on the day you become the legal owner of the house (settlement day).
  22. **For apartment or townhouse, the body corporate may already cover the building insurance, so you may only need to buy content insurance. Ask for this information before you buy the house - ask the body corporate manager to provide you with the information of the insurance details (level of cover, type of cover and payment status).
**For a house, you may need building and  content insurance.
  1. If you are buying an apartment or a townhouse, with body corporate expenses, choose the lowest body corporate as possible. This means you buy apartment or townhouse with no lift, no onsite manager, no pool/bbq, etc.
  2. When you look into your Body Corporate Disclosure statement pre-purchase stage, analyze how much sinking fund they have (in case of emergency). THis way, just in case there is an emergency repair, there is sufficient money in the body corporate fund to repair the damage without needing the owners to fork out another funds to repair.
  3. Stay in a safe (safe from crimes, flood, fire, etc.) neighbourhood, it reduces your home insurance premium and even your car and content insurance premium.
  4. Buy a house in the suburb that will get the flow on effect (that is the next suburb that will increase in capital). The house price increase will offset (psychological offset) the mortgage.
  5. Do not keep borrowing against increase in your home equity.
  6. Don’t buy into a brand new house or an off the plan house. There is a premium price attached to it.
  7. Buy a house that is at least several years old.
  8. Buy a house with land content (or something that is in short supply) that will cause the capital price to increase nicely over the next few years.
  9. Buy a house that has historically decent or good price increase. Although historical returns do not warrant similar future return, but it could indicate slightly similar future return. It will be nice to know that your mortgage is getting smaller (in some sense) against the house price increase.
  10. Conducting building and pest prior purchasing the house, may save you some major repair cost. In this inspection you can find out if there is any major structural issues, or any major pest issues.
  11. If there is a non minor issue uncovered after the building and pest inspection, you can use it to bargain the price down (thus, minimizing your mortgage) with the vendor.
  12. Buy the ugly house on the best street. You will laugh all the way to the bank, because you will enjoy the capital increase (of the house price) without having to pay the high price (of the expensive house purchase).
  13. Buy a house at the market value. How? Compare to similar properties that have been sold in the last 12 months (check domain price guide, onthehouse and house.ksou.cn)
  14. Buy a house during cold/slow period or during buyer’s market. You will have more power to bargain the house price down.
  15. Buy a house when the seller is keen (desperate) to sell. You can bargain the house price down.
  16. Consider interest only mortgage repayments with extreme caution! which includes,
  • bank all of your money into the offset account,
  • money that are saved (from going from P&I to Interest only) must not be spent but must be saved that means, going into the mortgage offset account
  • keep increasing your saving rate, be financially lean.
  • remember your aim is not to increase cash flow, but to pay off mortgage as soon as possible.


©™ Kaizen Money Smartt


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