Everyone should be taking advantage of these pocket-rocket calculators, whether you’re a homeowner or an investor. Even though a mortgage is a rite of passage, it’s still something you want to be free from sooner rather than later.
Your focus should be on paying it down as fast and quickly as possible. Some people use the investment property strategy, so the rental income pays down their home loan, which is a great approach.
If you’re not ready for an investment property, you can pay down your mortgage the old-fashioned way: one extra payment at a time.
Today, that’s become even easier, and more rewarding, with debt paydown apps.
Here’s why you should be ruthlessly paying off your mortgage:
- The more you pay down early on, the less interest you’ll pay in the long run because your principal (the amount you borrowed) is lower and your loan term is shorter
- Every dollar you pay off is more equity you can use for buying other properties or assets
It’s helpful (and, just quietly, smugly satisfying) to see what each extra dollar is doing to your mortgage.
Any and all extra payments add up, even if it’s just a few dollars:
- Adding an extra fixed amount to your minimum repayments
- Throwing in periodic lump sums (from work bonuses, windfalls or tax returns)
For example, here’s how much you can save just by adding $80 a month to a $430,000 mortgage with a 30-year term and 3.5% interest:
Total interest paid:
$20 week/$80 month
Time saved on loan term:
2 years, 2 months
Savings on interest:
Adding $20 a week, just $80 a month, means you’ll pay off your home two years faster and save over $20,000 in interest. Imagine if you could find a way to pay off even more each month.
The problem is, as you go about your daily life, it’s hard to know the impact of an extra dollar here or there. That’s where apps like these ones we’re about to explain come onto the scene.
Apps show you the end picture
Unless you’re a whizz at mortgage calculations, it’s hard to work out the big-picture difference on a 30-year loan when you pay down your mortgage faster each week.
Apps can make it simple to calculate, easy to do, and effortless to manage long term. In fact, it’s likely you’ll get mildly addicted to watching your mortgage forecast diminish each time you check in on your app.
Let’s look at the three most popular and effective apps for making faster mortgage paydown a breeze.
1. Karl’s mortgage calculator
Hands-down one of the most popular mortgage repayment apps is this one. You can create different scenarios for a repayment schedule based on the value of your home.
For instance, you can play with extra repayment amounts to see what works best in the long run.
But, you can also reverse calculate the principal, interest and loan length, which means you can decide when you want to have paid the loan off, and the app will tell you what you need to pay to get there.
So, you could say you want to have your home paid off in 15 years, and the app will tell you what your repayments will need to be. It gives you a rock-solid goal to work towards monthly or weekly.
The app allows you to include fees, taxes and insurances, so you get a complete picture of your mortgage.
The name isn’t very creative, but the app does the job beautifully. It’s simple and easy to use, but provides lots of functionality.
You can input all the details about your loan and choose your payment frequency. Typically, paying weekly helps pay off your loan sooner, and you’ll be able to compare the payment frequencies to see the difference long-term.
The impact of extra payments can be logged as a regular occurrence or one-off events, giving you control over the exact figures each month.
You can see your results broken down into amounts of principal and interest paid over the course of the loan, and save various scenarios so you can compare the different outcomes.
Available on: iOS
3. You Need a Budget (YNAB)
YNAB is different to the first two apps because it focuses on holistic budgeting as well as paying down debt like a mortgage. You’ll need to use a mortgage calculator/predictor like the ones above in tandem with YNAB, because it won’t calculate the impact of extra repayments for you.
But, once you know what you want to pay each week or month (using a debt payment app), you can plug your figures into YNAB for an easy-to-visualise plan for your repayments.
YNAB can connect directly to your bank accounts for a big-picture view of your incomings and expenses. You can set small targets and watch your progress in real time.
You’ll be able to see exactly where your money is going and how to adjust your budget so there’s more going into your mortgage repayments.
Price: free trial period, then monthly or annual subscription
The end goal of mortgage repayment
It’s helpful to remember that just because a lender has set a minimum repayment, doesn’t mean you have to stick to it. You can add as much extra as you want.
Make sure to use offset accounts (using your savings account as a ‘payment’ against your mortgage) to reduce your payable interest, and use all the tools you can to bring your debt down.
The less debt you have, the more opportunity you open up for investing, using equity, and selling for more profit.
Find your forever home
Talk to a mortgage broker or contact one of our team to help. We have finance experts who can help you work out your borrowing capacity.
We can even help you source suburbs where you’ll profit most from a home purchase, so you can get out of the rental roundabout and move onto the property ladder while the conditions are in your favour.