Well here’s an alternative strategy to getting your mortgage paid off fast. Now is the perfect time to employ this strategy. It’s simple, it’s easy and it works!

Mortgage extermination plan

Here’s how it’s done.

• Take your mortgage and split it into two parts.  The first split is an amount that you feel that you could pay off in the next 3 years if you were really focussed – and then add 20%.
• This first split will be a standard variable basic mortgage.  The second split is to be a fixed at a low rate for 3 years, with interest only repayments.  Given rates are so low at the moment – this is a good time to do this.
• Once the mortgage is split, then you focus all your “debt paying off ability” on getting rid of the first split – the basic variable mortgage.

Practical example

Andrew currently has a $400,000 mortgage. He feels he could pay off $80,000 in the next 3 years if he was to really focus. We add 20% to this amount because when we get focussed on debt payments often money turns up and we achieve more than expected. Adding 20% to this brings it up to $96,000 – so Andrew rounds this up to $100,000.

Andrew then splits his mortgage to a basic variable mortgage owing $100,000 – and then a $300,000 mortgage fixed for 3 years – interest only on a fixed rate. Over the next 3 years Andrew gets really serious about becoming debt free and pays as much off the $100,000 basic variable mortgage as possible.

In 3 years’ time, he’ll do the same thing again… he’ll repeat the exercise and split the remaining mortgage. If Andrew has been able to pay off the whole $100,000, then he’ll only owe $300,000.

Keep in mind that good family financial planning is not all about maths – it is much more to do with good disciplines and behaviour

This strategy helps with the discipline side of it. Don’t be concerned if interest rates reduce after you’ve fixed the 3 year mortgage – as this plan is more about making some real headway with paying off debt.

Remember to have your emergency fund in place which `sits against your basic variable mortgage split.

Benefits of this strategy.

1. It gives a great sense of making progress as the mortgage is clearly going down fast – and that feels great. This feeling keeps us motivated to remain focussed and continue working the plan.
2. It can protect against short-term interest rate moves by locking in a 3 year rate on the larger mortgage whilst the variable rate mortgage moves as the rates do.

Mortgages are not meant to last for 30 years. Only the banks want you to have a mortgage this long. You should aim to get out of debt as fast as possible – certainly no longer than 15 years. If you employ and stick to this strategy, it will definitely get you out of debt fast.

Imagine how your life would be and what you could achieve without mortgage payments!

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