Money and Finance

How to own your house outright in 10 years

After years of skyrocketing property prices, owning a home outright has become out of reach for many Australians.

But one Melbourne mum as seen on Channel 7 news this week has paid off her mortgage in just 10 years and is now giving advice to others wanting to live debt-free.

Heidi Farrelly has achieved the real estate dream after buying her home in 2008.

“I finally own my own house and it feels amazing,” she said.

“Having paid off the house – that freedom, the freedom that you can do things you didn’t do before – you can go on an overseas holiday.”

Ms Farrelly bought a lime-green 1960s fibro home in a suburb she liked.

Some extra tips that came from the interview with Heidi:

  • buy something that does not reach your loan limit, so you have enough money left over to make extra repayments
  • consider buying the worst house in a suburb you like
  • not to make unnecessary purchases
  • take a thermos to the beach on a day-out or to work over relying on cafes
  • fortnightly payments as you make an extra repayment throughout the year without really noticing
  • Should you get a pay rise at work put extra cash into the mortgage rather than it getting sucked into everyday spending.

We’ve all heard it all before but having an offset account on your mortgage is paramount. Money you hold in such an account is simply offset against your loan so if you have a $100,000 loan but $10,000 in an offset, you pay interest on $90,000 only. It basically lets you use every dollar twice – for its purpose and to save interest. This loan structure is far better than an all-in-one or redraw-style of loan because you can’t accidentally go further into debt; you can have multiple offsets named for their purpose so can’t get money mixed; you have ultimate flexibility to access the money whenever you need it (including if you lose your job, when a bank might freeze redraws); and making additional repayments into an offset, rather than your loan directly, means your property can still work as an investment if you decide later to rent it out – you’ve never technically paid it down.

Ms Farrelly’s achievement of owning her own home is even more notable given the decline in ownership rates.

Less than half of Australians aged between 25 and 34 owned a house which was a total different story 10 years ago.

When we analyse our local market in Western Australia, only about a third of residents own their home outright. Another third has a mortgage and the final third rent.