Most mortgage loans have a duration of at least 20 years and some up to about 40 years. That is a really long time and can be the majority of a person’s adult life. However, the good thing is that there are many ways you can pay off your loan sooner and therefore reduce the duration of it.
We have compiled a list below. Even if you don’t implement all the tips we outline, just by implementing some of them can take years off the duration of your home loan.
Purchase with a significant deposit
Although you can definitely secure a home loan without a deposit, the best way to cut down the life of your mortgage is to reduce the initial amount borrowed. Instead of settling for a 5% or 10% deposit, dig deeper and save 15%-20% of the purchase price to start with.
Change from monthly repayments to fortnightly
By simply changing from monthly repayments to fortnightly can greatly reduce the terms of your mortgage. This is because the interest repayments will work faster to reduce the mortgage. You will be amazed at the different this will make.
If interest rates fall, keep your repayment amount the same
If you are used to a certain amount of repayments and interest rates fall, by maintaining the same repayment amount, this will cut straight into the principal amount owing. This can really accelerate you paying off the loan and is a way of making the most of low interest rates.
Pay off your mortgage with lump sums
When you get any lump sum amount, be that through an investment project, a tax refund or Christmas bonus, use that money to pay off a large amount of your mortgage. These large amounts can take years off your mortgage.
Offset your loan with a saving account
By opening an offset account, this will no doubt save you money. How does it work? The amount in your savings account earns interest (ideally at the same rate as your mortgage repayment), and that amount is subtracted from the interest payable on your loan.
So, for example, let’s say your net income is $65,000 per year. If you get your net monthly wages of approximately $5,000 per month and place this in your offset account which is linked to your loan, this will save you more than $20 per month in interest. Add this up over about 20 to 30 years and you will save thousands of dollars.
Change lenders if it will save you money
Shop around for the best rate. So, by refinancing and changing lenders, you can possibly also save thousands of dollars over the life of your loan. It also becomes easy to get the Same day instant loans every time before taking loans. The reason behind that is the changing of lenders, every time you go to a new lender they treat you as a good customer and complete your work as soon as possible. It is recommended to always have a good realt6ions with the lenders as they are the one who is goin g to help in the future also.
Make smart financial decisions
It is often said that the second biggest investment you will ever make is buying a new car. With this in mind, do not over-capitalise on an investment in a car. Cars are an asset that depreciates in value. One example of making a smart decision would be in the instance of purchasing a new SUV car. Sure, you could get one of the latest model 7 seater SUVs, however if you have a 5 person family or less, why not opt for a one of the top small SUVs? As you will see on the FamilyCarsAustralia.com website, these cars cost less upfront and cost less to run. The extra money you save can be paid against your mortgage.
Have a budget and stick to it
This is really important and by creating a budget and ensuring you stick to it, you will reach your financial goal of paying off your loan. But be sure to create a realistic budget and set goals that are achievable. The last thing you want to go is create a budget that is simply unattainable.
So, even if you don’t implement all the tips provided here, be sure to implement a couple of them and you will be guaranteed to save a lot of money and cut the duration of your home loan. You will heading in the right direction to being debt free.