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Paying off your loan faster really is as simple as having the best interest rate
possible and an additional payment strategy. The three main methods to pay off your
mortgage faster are:
- Negotiate/remortgage for a cheaper interest rate and pay only for the features you need
- Make your payments more often
- Make payments greater than the required amount – and as much as you possibly can
By using any one or any combination of the above methods, you can achieve substantial
savings. It's how you go about achieving these objectives and maintaining your advantage
that counts.
Pay Extra
Make sure your loan gives you the ability to pay extra be they regular or ad-hoc
payments. Making additional payments on your loan, big or small, is a real benefit
over the lifetime of your loan with regards to reducing interest charged and the
term of your mortgage. By calculating interest daily, extra funds have an immediate
effect on the loan balance and therefore the interest payable. 100% offset accounts
also help reduce the amount of interest payable while still having access to the
funds.
Try to make extra repayments
Making extra payments at any time will have the greatest
impact on your loan especially early on. In the early stages of a loan, you are mostly
paying interest and not reducing the principal much at all. So every dollar you
can use to pay off your loan earlier means a quicker reduction of principal and
results in less interest payments.
Try to make 13 repayments a year
If you pay your loan more frequently than monthly
and many loans will allow you to pay weekly or fortnightly, you get interest savings
because you are reducing the loan balance on a more regular basis to save you thousands
over the term of the loan.
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