The mortgage brokers at Smartline Rockingham know that most people would love to pay their mortgages off faster, but don’t have a solid strategy for doing so. Here are five things that you can do to get that home loan paid off faster.
In times of low interest rates, refinancing is the most popular way people are paying off loans faster. The lower the interest rate, the more money that goes to the principal. This can help you pay the loan off a lot faster if you have lower interest but make the same payments.
Shorter Payment Intervals
Many lenders will allow you to pay weekly or fortnightly instead of monthly. Because there are 52 weeks in a year, that means you pay the equivalent of 13 monthly payments instead of 12 monthly payments. Over a 30 year loan for $350,000, you could save as much as $49,000 and reduce the term of your loan by 4.5 years.
Larger Monthly Payments
If you add $50 or $100 to your monthly payments, you can save thousands of dollars and pay your loan off years faster. A great way to “hedge bets” is to insist on a mortgage with a redraw provision. This would effectively put the amount of your extra payments in “escrow” to be redrawn if you hit a “trouble spot.”
Some loans are written with a feature called an “offset account.” If you keep money in your savings or “offset” account, you won’t have to pay interest on the money in your account. For example, if you have a $300,000 mortgage and have $50,000 in an offset account, you only pay interest on $250,000.
Lump Sum Payments
You can also make extra lump sum payments when you have the chance. The earlier in the loan you make lump sum payments, the more you save and the faster the loan is paid off.
Call Smartline Rockingham Today
To learn more or for a “home loan checkup,” call Smartline Rockingham today: (08) 9527 1800.