Mortgage Costs

Why am I choosing to pay down extra on the mortgage right now? Honestly the main reason is to free up more cashflow and give myself breathing room. Let’s take a look at how my mortgage payments have changed over the past 2 years.

Initial rates
Investment Property – 3.8% – $1974/month
Property 2 – 2.29% – $2283/month
Property 3 Part 1 – fixed rate 1.89% – $1275/month
Property 3 Part 2 – 2.14% – $494/month, but voluntarily paying extra $731/month

After refinancing – before interest rate hikes
In 2022 I refinanced my investment loan to a better interest rate. I redirected the repayments that I was saving on the deductible loan to paying off more from Property 3.
Investment Property – 3.04% – $1440/month
Property 2 – 2.29% – $2283/month
Property 3 Part 1 – fixed rate 1.89% – $1275/month
Property 3 Part 2 – 2.14% – $494/month, and now voluntarily paying extra $1263/month

Now – after interest rate hikes
I continued to pay the same total payment to Property 3 even as interest rates continued to rise. This did mean that the ‘extra’ payment I was making did decrease. The fixed rate mortgage has also become variable now.
Investment Property – 6.43% – $1440/month – an extra $640
Property 2 – 6.24% – $4613/month – an extra $2330
Property 3 Part 1 – 6.14% – $2079/month – an extra $804
Property 3 Part 2 – 6.14% – $726/month – an extra $232.

So over the past few years, my minimum monthly repayments have gone up by over $4000/month. Rental income meanwhile has only gone up $220/month, and the property values have not changed significantly. That’s insane! While it all still fits within my budget, it leaves me less wriggle room for unexpected expenses and future rises in cost of living. So that’s why I’m trying to eliminate at least one of those loans as quickly as possible before returning to investing. Currently I’m throwing an extra $2400/month at Property 3 Part 2, and if I can keep it up I should be able to eliminate that mortgage in about 3 years. The other loans on the other hand will take decades to pay off at that rate of extra payments, so for now my plan is to just keep paying the minimums. Unfortunately my rates are currently the best rates I can get at the moment, no value in doing another refinance right now.

I’ve got more than enough skin in the property game at this point. I don’t see any further role for property in my portfolio going forwards. I’m looking forward to closing that mortgage account and accumulating more assets in the share market in the future.