Published at: 7/5/2016 1:54:22 PM
Pay down your home loan faster and save a bundle in the process.
There’s nothing quite like the feeling of owning your home outright. No more loan repayments, no more worries about where interest rates are heading…just you and your home with plenty of extra cash left in the kitty each month.
It’s not a pipedream. Follow our five steps to pay off your home loan el pronto.
1. Check you’ve got the right loan for your needs
The cheapest loan isn’t necessarily the best loan for you. The ideal loan has the right blend of a competitive rate plus features you will actually use to make your loan easier to live with.
2. Look for hidden charges
Paying monthly account keeping fees on your home loan is like paying a higher interest rate. Plenty of banks have scrapped monthly account keeping fees so if your lender is still putting a hand out for them it could be time to move on.
3. Make regular extra repayments
Paying just a single extra dollar each week into your home loan will see the loan paid off sooner. That’s because additional repayments come straight off the loan balance. That way, next month’s interest charge is lower, so more of your regular repayment goes towards the loan balance. It’s a great way to streak ahead with your home loan.
4. Add a lump sum payment
There are times throughout the year when a cash windfall comes our way – a tax refund, an end of year work bonus, or some unexpected overtime earnings. Add or all part of these windfalls as a lump sum repayment to your loan and watch the balance melt away.
5. Use your home loan as a savings account
Try this simple strategy. Deposit spare cash into your home loan instead of a separate savings account. You’ll save more in interest on the loan than you’ll earn with a separate savings account, and it’s a sure-fire to pay off the loan sooner. If your home loan offers redraw (as most do), you’ll be able to access the cash in an emergency. Or, if you’d rather keep your savings separate, consider an offset account.
For more ideas on living with your home loan head to ed – ME Bank’s fast, fun and free online school of money. It could help you forge a path to home loan freedom way ahead of time.