Dec 25, 2011

6 Tips to Paying Off Your Home Loan Sooner

When it comes to paying off the mortgage, whether it is on a home or an investment property, the quicker you can repay it, the better off you will be! By paying off your home loan sooner, you can save thousands of dollars by reducing the amount of interest you have to pay in the long run.

To help those in the process of organising a home loan, below are 6 useful tips on how to pay off your home loan sooner.

Tip 1: Take Out a Loan with Repayment Options

When homebuyers go to take out a loan they generally try and get one with the lowest interest rate. This can sometimes be a HUGE mistake. Instead of focusing on the interest rate, you should be looking at a loan’s repayment options.

Some home loan options, like a standard variable rate home loan, might have a higher interest rate, but there are also a number of repayment options available. Some loans have the options of making larger and more frequent repayments, without any penalties. Some loans also have a redraw function, which allows you to also redraw on those extra payments if, for some reason, you desperately need the funds.

The benefit of making larger and more frequent repayments is that you pay off your loan sooner. You can save heaps by paying off your home loan sooner, despite the fact your loan has a higher interest rate.

Tip 2: Make Sure Interest on Your Loan is Calculated Daily

When searching for the right home loan, try and get one that has its interest calculated daily. This is because whenever you make a repayment on the principal of the loan, you will actively reduce the amount of interest you have to pay on your next instalment.

Tip 3: Connect Your Home Loan to an Interest Saver/Offset Account

Some home loans provide the option of being linked up to an interest saver or an offset account. An interest saver/offset account is generally an everyday transaction account, where the interest paid into that account is used to reduce the amount of interest calculated on your home loan.

With an offset account, you want to store as much of your savings and salary as possible into that account. This will help reduce the home loan’s principal quicker and the interest paid on all future home loan repayments.

Tip 4: Pump Extra Funds into Your Home Loan

If you accumulate any surplus cash you should immediately put it towards paying off your home loan. This reduces your chances of wasting your cash on frivolous things.

When taking out any kind of loan, you should also be on a budget and putting money towards only the essential things. This can be tough and not much fun. You have to constantly remind yourself, however, that every dollar you put towards paying off your home loan sooner can save you thousands of dollars in the long run. With the money you end up saving, you can treat the whole family to something nice!

Tip 5: Pay Your First Home Loan Instalment Upon Settlement

Usually your first home loan instalment is paid a month after the settlement of you loan. However, if you pay the first instalment upon settlement, you have immediately reduced the amount of interest you will have to pay on your next instalment and all future repayments.

Tip 6: Seek Professional Financial Advice

Speaking to a financial adviser can highlight a number of effective ways and strategies to help you find the right home loan and to pay it off sooner. You don’t (and shouldn’t!) have to do all the number crunching by yourself, as it can be quite overwhelming.

Financial groups know the tricks of the trade and have the experience to help you develop ways to efficiently use your income and assets to pay off your home loan sooner. Some groups, especially those dealing with investment properties, even have access to special software programs, like
real estate development software, that can help in balancing out your positive and negative cash flows. This is particularly useful if the loan you have taken out is for an investment property.
Search Term :


kimmy said...

hmmmm.. this requires some serious thinking..

Soulful said...

hmmmm.. this requires some serious thinking..

Soulful said...

hmmmm.. this requires some serious thinking..

ide said...

Thank you so much for sharing this kind of help full information by this blog

  © Blogger template 'A Click Apart' by 2008

Back to TOP