The current trend often seen throughout the internet is being able to pay your home off in 7 years. But how does it actually work? Is it even possible? How practical is it for the common man? These are some of the questions we will be exploring.
The most common strategy
Commonly the strategy to pay your home off in 7 years isn’t actually to get your final dream home. It is to acquire a home which as a high capital growth rate. Capital growth, in short, is how much the house value goes up. There are a few ways you can get a home with high capital growth.
- The area you are purchasing in increases heavily in value. Potentially due to new infrastructure or new developments
- You renovate the home extensively to add value to the home
The issue I find with this strategy is, that no matter how well you analyse data, no-one has a crystal ball. No-one knows how quickly your property value will increase – or if it will increase at all! The best you can do is look at past trends, current trends and forecasts with proposed infrastructure and other projects, to guestimate where the best areas will increase in price.
Once your property has increased in value enough, the idea is to sell the property and use the proceeds to purchase your own home. However, once again, whose to say that the home you wanted to purchase doesn’t heavily increase in value – more than the home you held for 7 years did.
To combat the issues mentioned, some people buy multiple investment properties leveraging their income and individual circumstances. As a collective, all the properties once sold can help you get into your new home.
There is no denying that a lot of people to adopt this strategy and it can be a good strategy. However, there is no denying that it does come with it’s faults. A issue that is present but not commonly talked about is house prices decreasing in value as opposed to increasing. Though historically this has only happened on a handful of occasions, it is important to understand that with this strategy there are risks involved.
How to pay down your mortgage without investing
Some of my happiest clients simply want to buy a home, pay it down and enjoy their life. There is nothing wrong with this and is a strategy that I applaud. But if you don’t want to take the risks and hassles of owning an investment property, how do you pay down your home loan?
There are 41 easy ways to pay down your mortgage without changing your lifestyle
Well there are 41 ways that you can do this. I discuss this in my book 41 ways to pay down your mortgage without sacrificing your lifestyle.
All of them have to do with 3 main points
- Making extra repayments to your mortgage
- Ensuring you are always on a market leading rate & product on the market
- Implementing strategies as early as possible where they have the largest impact
A good mortgage broker will always ensure that you have a market leading product. It is important to note that, even though your rate might be 0.2% higher than another lender, it still may be cheaper to stay with your current lender. You need to consider annual fees, refinance costs and practicality with moving your banking to another bank to maximise using an offset account.
This means that you need to me extra repayments towards your mortgage and start the strategies you would like to use as early as possible. It really is that simple.
Whatever strategy you choose to implement, make sure it is one that works with you and you can implement for a long period of time. Long-term practical strategies are always better than short-term strategies.
Conclusion
There is no denying that investing can help you become mortgage free in 7 years. However you should understand the risks involved. For the everyday person, these strategies may not be one that you would want to explore because of the risks, costs or hassles that come with being a land owner. However, you can still work to reduce your loan term, even if it is not down to 7 years. There are multiple ways to do so but you should work out the best way that works with your lifestyle. As the strategy you can implement for a long period of time is the one that will help you pay off your home loan faster.
