With the average size of an owner occupier home loan in Australia exceeding $538,000 in March 2021, and most new borrowers well into their 30’s. Many can only dream of paying their mortgage off before they reach their official retirement age.

For borrowers in east coast capitals, the average loan amount is greater still, making the prospect of a mortgage free retirement seem harder still. The great news is, it is possible to reduce your mortgage and do it in time for you to retire mortgage free.

Here are five tips that will help you reduce to your home loan faster:

1. Everyone needs to be on the same page

Once you decide that getting rid of your mortgage as quickly as possible is a priority for you, it’s important to make sure your partner is also feeling the same way.

At the end of the day, if you jointly contribute to household finances, then it’s vital you and your partner are both clear you’re working towards the same goals.

This means there should never be any “financial infidelity” going on and honest spending habits need to be identified from the get-go.

If you’re adamant on having separate “spending money”, it’s in your financial best interest to split your weekly allowance (see third tip) and keep everything else jointly linked.

2. Set up an offset account

Set up a 100 per cent offset account linked to your mortgage to reduce the amount of interest you’re charged on your home loan repayments.

The savings you can make by doing this – as opposed to just pouring all of your money directly into your mortgage – is enormous, and you will be able to pay down the principal faster while maintaining your access to cash flow.

Basically, you want to send all of your income here, and from inside this account, you can organise direct debits and other automatic payments.

If your lender chargers an annual or monthly fee for offset accounts, you need to remember, you need to have sufficient funds in account to cover this cost before interest savings benefits kick. For a $395 annual fee, general estimate is that you need to maintain a running balance of at least $10,000 in order for the interest savings to kick in.

3. Use a weekly allowance system

Arrange to automatically transfer a weekly allowance to cover your day-to-day living costs from your offset account into a transactional account.

This is the total amount of money you will have to spend each week on living and lifestyle costs, such as groceries for that week, your daily “must have” coffee or any takeaway food or activities that you’ve decided you’re comfortable regularly spending your money on.

This encourages a “make it last” mindset, so once this apportioned amount is gone, it’s gone until your next allowance pay day.

4. Consolidate your debts

Payout and close or consolidate your consumer debts to reduce your monthly expenses. This should result in a greater monthly surplus, which can go towards the mortgage in your offset account.

Classic examples of consumer debt are high-interest credit cards and short-term personal loans such as car loans with really high monthly repayments and everyone’s fast finance favourite, ‘Buy Now and Pay Later’ facilities.

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5. Consider secondary earnings options

If you’re willing to get a second or third job, you can throw this extra money at your mortgage.

For example, if you already drive to work, maybe you could consider turning this time into an opportunity to drive for Uber as well.

This way, you’ll actually get paid for your travel time, and it shouldn’t become too much of an inconvenience if you stick to passengers going in the same direction as you.

Ultimately, it is possible to pay off your mortgage sooner by implementing these simple suggestions, but it does rely on you obeying the number one foundational principle of money management: don’t spend more than you earn.

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This article via Smart Property Investment does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.