Don’t use your advance mortgage payments as an ATM

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Transcription

Helen: Hi, how are you doing?

Announcer: Good, thank you now, we’ve been doing the whole home loan talks over the last couple of weeks and you’ve got some dos and donts when it comes to paying off the mortgage right?

Helen: Yeah, I’ll have a go at the don’ts – which is not to use your home as an ATM. So, what does that mean? It just really means that people will put a lot of money in on their home, and pay it down and get close to the finishing line or get a long way down the track and then go, oh we need to upgrade the car, or do this trip overseas. And rather than saving for it secretly and being disciplined and maybe sacrificing some other things in order to do it. They take the money off the mortgage, and top their mortgage back up again and away they go.

So the problem with that is you sort of never really paid down your mortgage. And if you are adding value to your home, so say for example you used it to put an extension on or something like that, in essence, you kind of added to the value of the home, so you might get that money back. But if you used it to buy a car or something like that which is a depreciating asset, then you are losing money by doing that.

So we want to try and get rid of those home loans as soon as we can and just be disciplined enough to, once we are doing so well with it, that we don’t just keep pulling the money out like an ATM machine and pulling cash out and then just going backwards over time.

Announcer: I totally get that. And we do, we want to try and pay it forward a bit, be planning be putting a little bit extra on so it comes down. So the worst things to do is, oh well I just need couple of thousands, I’ll pull that out. And then it just goes up again and you’re sort of cancelling out anything you’ve done.

Helen: Yeah, and then you’re going to end up paying more interest again and also make the loan last for longer, which means more interest as well. So you want to try and get away from paying that interest so the money is in your pocket not the banks.

Announcer: Brilliant.

Helen: Sorry Mr. Bank.

Announcer: Ah, Helen, you just make it sound so simple. Thanks very much for joining us again this evening.

Helen: You’re welcome, take care.

Announcer: If you want to find out more, Helen Baker is her name, she’s absolutely wonderful, and you can find out more about her at OnYourOwnTwoFeet.com.au.