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How to get out of debt 10 years early… and far more cheaply

·3-min read
Teenager showing anxiety holding bill
A wave of interest rate rises can be scary news for mortgage holders. (Source: Getty)

Price pressures are everywhere right now and no less than the governor of the Reserve Bank of Australia (RBA) has added a warning of a worrying cost impost… the potential for multiple interest rate rises before Christmas.

For many mortgage holders, that’s a scary prospect as there’s virtually no escaping the (pointless in that the extra money simply goes to your lender) expense.

Read more from Nicole Pedersen-McKinnon:

And it has me thinking: What would it take for the average person to get out of debt and out of interest harm’s way, while rates are still low?

Alert: Mortgage-freedom is still cheap

Yes, interest rates have begun to increase. But remember, historically they are still low.

Take a typical $500,000 mortgage over 25 years. Before the credit crack up, the repayment pain would have been at a rate of eight per cent.

You would have had to find $3,859 each and every month to service your mortgage.

Overall, that $500,000 loan would have set you back an additional $657,725 in interest.

Did you clock that it more than doubles the price of your home?

But, fast forward to today and you can still, despite rising rates, get a quality home loan way down at three per cent.

And the difference in what you pay is phenomenal.

A monthly minimum of just $2,371 – a drop of $1,488 – and less than half in ultimate interest what you originally paid for your property at just $211,317.

That means you keep for yourself, and from your lender, $446,408.

Of course, these figures get even better if you cut the term of your loan contract down from the standard 25 years. That’s how you make massive mortgage savings and free up all the money you are currently committed to using for repayments.

What extra money is worth to you

I teach several savvy strategies to get debt-free more easily. Not by working harder but by working the system.

Watch this video to see, including the debt-busting masterstroke that doesn’t even cost you a cent.

And here are several other extremely smart techniques to slash your time in debt at extremely low cost.

But what would it be worth to you to find a bit of extra dosh to ditch mortgage early?

Speaking still about that $500,000 home loan at three per cent that your lender wants you to slog it out repaying for 25 years, here is how the figures land:

Save $13,678: This is the payback from finding $100 extra a month. And that freedom 1.5 years early.

Save $25,650: This is your reward for finding $200 extra a month. And three bonus years without repayments.

Save $36,221: This is the result of an additional $300 extra a month. Along with debt-freedom four years early.

Save $54,057: From an extra $500 a month. And pocket your repayments for six whole bonus years.

Save $85,796: This amount, more than the average annual wage, is from finding $1,000 extra a month. What’s more, you will be mortgage-free 10 years early.

It is far cheaper and faster to pay down a loan with interest rates that remain low; more money goes towards your future rather than into a lender’s coffers.

Get started today.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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