Ask anyone with a Home Loan, “What is your main financial goal?” and the answer would be, “To pay off my Home Loan”. It’s every Aussie’s dream to buy their own home and to eventually pay off the mortgage.
So why is it so difficult? Too confusing? Life gets in the way? Get into a ‘set and forget’ mentality?
Here’s 4 simple strategies to pay off your home loan sooner
1. Pay more frequently
If you divide your monthly repayment by 4 and pay weekly, you will have 4 extra payments per year shaving 4-5 years off your loan.
2. Review home loan with an expert
If you took the time to examine your current Home Loan and talk to an expert, how much could you save? Your home loan rate should be regularly reviewed with your broker to see if you’re getting the best deal.
3. Make extra payments
Any extra payments made on your Home Loan pay directly off your principal amount, reducing your loan term.
4. Get serious with saving
Get serious and add every saving opportunity to the weekly Home Loan repayment. Using a budget planner can help you with this.
Let’s take a look at a savings scenario
Let’s imagine your current loan for $400,000 is at a variable interest rate of 6.39%, with monthly repayments of $2499:
- Refinance your Home Loan from 6.39% to 5.89%, saving $32/week
- Change from monthly to weekly repayments of $593
- Work through your household budget and find $40/week
- Set up the new weekly repayments of $633
- Utilise your offset accounts and redraw facilities to reduce interest.
Just from making these modest adjustments, your home loan term will be paid off in 21 years and you have reduced the interest paid by $153,000.
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