If you've taken out a home loan to finance the cost of your property, you're compelled to make monthly payments to repay your loan. Depending on the duration of your home loan, perhaps you're looking for a way to pay off your debt faster. The good news is that it's easier than you think and you don't have to scrimp to make your repayments – if you follow these intelligent strategies. Pay off your mortgage finance sooner and save on interest with no change to your lifestyle.
Make Windfalls Count Towards your Home
Got a tax refund from the government? Or perhaps you've inherited a large sum of money from a deceased aunt. Either way, these windfalls are great for paying off your mortgage finance faster. So think twice before you decide to splurge on a new luxury car or book that business class ticket on your next vacation. Making lump sum payments could reduce the term of your loan and reduce your interest dramatically.
Retain Same Payment even when Interest Rates Fall
Many home loan holders decide to cash in on falling interest rates by lowering their mortgage finance payments. It will be beneficial for you in the long term to retain the same amount of payment. By retaining the same payment in a lower interest rate environment, you could add a few thousands every year into your home loan repayment – this means that your home loan gets paid off faster and you'll be a mortgage-free homeowner sooner than you imagined.
Make an Extra Payment Every Year by Switching to a Fortnightly Repayment Schedule
Most home loan finance companies calculate repayments on a monthly basis, but they also offer you the flexibility to switch to a fortnightly model. By switching to a fortnightly schedule, you get to make one extra payment every year – this ultimately means that you can pay off your loan faster. For your benefit, here's an illustrative example – assume you make a monthly payment of $1000 towards your loan. For the year, you make a payment of $12,000. If you increased your frequency to every fortnight, you'll know that there are twenty-six fortnights in a year. If you made 26 fortnightly payments of $500, your annual home loan repayment will amount to $13,000. This is the equivalent of an extra month's payment. This helps to repay your home loan faster.
Choose a Finance Loan with a Shorter Term
Choosing a loan with a shorter team literally compels you to repay your loan faster. This is an effective strategy to reduce the duration of your debt, provided you can afford to make a higher payment. Keep in mind that circumstances can change – for example, an unexpected expense or a job loss. Choose a loan that gives you the option of re- amortising your home loan to a longer duration.
Pay off your mortgage finance as soon as possible and become a debt-free homeowner as early as you can. For more tips, work with a local finance adviser.Share