Having a home loan can be a rather daunting thought for many people, no matter what their income is. Depending on the set-up of your loan, there could be many years ahead of making repayment after repayment. To avoid accumulating interest and becoming stuck with repayments for a lengthy period of time, consider some of the below tips to incorporate into your budget.
Re-Evaluate
When you first bought your house, the loan you signed up for may have been the best option at the time, but is it still the best option now? Interest rates change, house prices fluctuate, and banks adapt their offerings. A great tip that could help get your mortgage down quickly is to speak to a professional such as Heritage Bank about what home loan might suit your circumstances now. Check out their home loan calculator – varying the contributing factors can also help you assess what changes would be ideal to make.
Deposit Spare Cash
Depositing spare cash straight onto your home loan is another great tip to get your mortgage paid off sooner. As tempting as it might be to use that cash elsewhere, think about how much easier your home repayments will become once there’s less to pay and the interest repayments come down. This will be the time to focus on savings again.
Align Your Repayments
Another tip for meeting your repayments is to align them with your income. For example, if you get paid monthly, make the repayments monthly, or if you get paid fortnightly, pay them fortnightly. By incorporating this strategy, you will always find yourself well placed to maximize the amount you are paying, and even make additional payments on occasion.
Have an Offset Account
An offset account is something not everyone would think of setting up; however, it is a handy feature to have up your sleeve if you want to pay off your home loan sooner. Because this account is offset daily against your loan balance, your interest payments will be reduced and you can get that loan down quicker.
Don’t Reduce Repayments
It might be tempting to reduce your home loan repayments if you’re not paying the minimum, or even to refinance the loan so the repayment term is extended. This will only bring your home loan to a standstill. Calculate your income and expenses, and stick to what you have already been paying. Reducing will only take you backward, not forwards.
Nobody wants to be paying off a home loan forever. A home is a huge investment that you may want to be able to pass on to your children one day – and preferably without the debt that comes with it. To do this, try utilizing some of the above tips and taking a smarter approach to how this investment can work best for you financially.
What are some of your favorite savings tips that could be adapted to help you pay off your home loan quicker? Discuss your answers in the space below.
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