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April 03 newsletter

Welcome to the Shape of Money's step-by-step guide to the secrets to wealth.

This month we look at another secret to wealth: reducing your mortgage.

Over the past few months, we've looked at the impact of various forms of debt on the achievement of your financial goals. This month, we look specifically at mortgages.

the Shape of Money has addressed the topic of mortgage reduction at various times, so perhaps it's an issue you've already looked at. If not, we urge you to do so now. Debt is a major barrier to achieving your financial goals. But it's also a barrier you can do something about.

If we assume an average residential mortgage of $150,000 and interest rate of 8%, then some simple calculations with the mortgage calculator quickly demonstrate why it's worth investing some time in achieving a better deal. For example, reducing the term of such a loan from 20 to 15 years will save you around $43,000 in interest - a sum that will certainly assist in achieving your financial goals.

It's easy to watch TV tonight, but why not take an hour or two out of your evening to see what you can do to reduce your mortgage and literally save thousands of dollars.

  • Can you increase the value of your repayments? In the earlier example, increasing your monthly repayment from $1,250 to $1,400 will reduce the length of your mortgage by four years from 20 to 16 years, saving you $35,000 in interest.
  • Have interest rates been tracking down? Can you negotiate a lower rate? Again, using the above example, a reduction of 0.25% will save you $5,500 over the term of your 20 year mortgage.

For other tips and assistance, please check out our reducing the mortgage pages.

In other news - are you looking for some personal financial reading this Easter? Have a safe and happy Easter break.