Mortgagees can make compounding work for them
Cutting back on buying one takeaway coffee each day can save you $45,000 over the life of a mortgage, eating out a little less would save you $72,000 in interest costs and cut four years off the loan, while swapping a fortnightly cinema visit for DVDs can save $38,000.
Wealth management firm Yellow Brick Road has crunched the numbers on a range of simple weekly expenses. It found making a few relatively small changes can cut the interest cost of a typical mortgage by more than $200,000.
Executive chairman Mark Bouris says many people don't act on cutting their small costs because they don't think it will have much impact on their mortgage. “This is the power of compounding in reverse.”
Bouris suggests asking your pay office to take extra money from your pay – perhaps $200 a month – and pay it directly into the mortgage.
Source: The Daily Telegraph