When my friends and I are all playing poker and someone goes “all in”, there is always a table wide groan. We don’t play poker all that often, but when we do it’s normally been so long that everyone’s forgotten that when playing seriously in even a small group of four or more, it can take a LONG time to have everyone eliminated. Thus the nights always start off beers in hand, music blaring and everyone having a ball but after the 3rd.. 4th or even 5th hour the fun has kind of worn off. None of us love poker THAT much. So it’s at this point someone inevitably goes “all in” and shoves all their chips into the middle of the table. It’s a sign that the person normally has had enough and just wants to give up and die, usually so they can go off and drink in peace. For your mortgage on the other hand, going all in should be the default.
As explained in a previous post, Offset Accounts Are Pointless Wastes Of Money and should never be used. Instead you should setup your mortgage so that you have free access to your Redraw, of which, you should have lots of after a few extra loan repayments. As this redraw is free though, going all in should become second nature as there’s no downside to making a mistake and putting “too much” into your home loan. With free redraw you can sit there putting thousands in and taking it straight back out again all day long! This is a powerful habit to get accustomed to as it means you can push your finances to the absolute extreme… all while having a super easy safety net when one of life’s fun surprises pop up.
Now a lot of bog standard “10 easy steps to pay off your mortgage super duper fast!” lists will mention something similar to this in that you should always keep all your money/salary/etc in an offset account. Whilst the above point is similar, there is a stark difference as it’s not just about putting your money in a place that offsets the mortgage interest, it’s about getting over that roadblock some people have of being scared to put extra money into their loans. They believe that once it’s in there… it’s NEVER coming out again and so refuse to put the extra money in. Now, if you’re like me then you’d probably prefer to have a brain haemorrhage than to take money back OUT of your mortgage, but that again shouldn’t stop you from putting more in.
You see, if you ARE scared of putting money in, then the money stays in your everyday account. You see it every day and are highly likely to use it (probably on crap). If however you put it in your mortgage as an extra payment you not only get the warm fuzzy feeling inside that you’re paying off your debt faster, you also will likely not notice it’s gone and thus not spend it on “disposable income” type purchases. Whilst I’m very much against taking money out of our mortgage I do know in the back of my mind it’s possible if a truly serious reason does arise (such as a lost job, major accident and so on). Thus I can be quite confident about putting almost all my spare money into our mortgage and you should too.
Currently we do this “all in” trick by pumping up our mortgage repayments as high as we can go. If it so happens that I’ve miscalculated (or something big changes too quickly) and we find ourselves out of money then we’d simply take some cash out of our Redraw account. This thankfully hasn’t happened so far, but do consider trying to alter the way you see your everyday account, it can be one more factor in mutilating that mortgage.