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Pay Off Your Home Loan Sooner
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Many Australians paying their home loans don’t want to spend their entire working life paying their hard-earned money on interest payments. So, if you are one of these many Australians who have a home loan, then when you read this article you will be able to understand how making additional monthly home loan payments can help you to pay off your home loan sooner.
How to Repay your Home Loan Sooner
Paying off your home loan sooner than planned will take a significant financial load off your shoulders and save you money in interest payments, not to mention freeing up the cash that would have gone towards your monthly home loan payments. Most Australians don’t just come into thousands of extra dollars all of a sudden so they have to find a way to fit making additional home loan payments into their household budget.
The ability to make additional monthly home loan payments is something you can consider. You should also keep in mind that by making additional monthly payments on your home loan you should be able to:
• Significantly reduce the length of your home loan;
• Save yourself money in interest payments; and
• Get rid of your home loan and live mortgage –free sooner.
The amount saved will vary based on:
• The initial size of your home loan; and
• The interest charged on your home loan.
“Example” of how making extra monthly payments on your home loan can save you time and money:
Simply, by making an additional monthly repayment of $200.00 over the life of a 30 year home loan for $450,000 at an interest rate of 4.59 per cent will amount to an eventual savings.
Hypothetically, by making a monthly payment of $2,505, rather than the minimum required amount of $2,305 it is possible for you to:
Reduce the length of your loan term or required payments by 4 years and 7 months (i.e. the term of your home loan is reduced from 30 years to 25.3 years; and
Reduce the total amount of interest paid into your home loan by $67,520 (i.e. from $379,516 to $311,996).
So, if your home loan allows you to make additional monthly repayments and you can afford to pay a little more towards your home loan each month then this can be a smart and worthwhile option for you to consider.
Which Home Loans Allow Additional Repayments?
Most home loans are generally set up as either fixed interest rate or variable interest rate home loans, or as a combination of both.
“Variable”Interest Rate Home Loan
If the ability to make additional repayments on your home loan is something you are considering and flexibility is important, then the variable interest rate home loan will offer you the most flexibility where additional repayments are concerned.There are a number of lenders/credit providers that will allow you to make an unlimited number of additional repayments through the life of your home loan. You may even find this to be a free service offered to you as a standard feature of a variable interest rate home loan.
“Fixed Interest” Rate Home Loan
Keep in mind, if you choose a fixed interest rate home loan and your financial circumstances change later (i.e. you may want to make additional repayments and reduce the total period of your fixed rate home loan) you may find that you will be required to pay an Early Repayment Adjustment (ERA) fee.
Extra Repayments Calculator
You can use this useful “Extra Repayments Calculator” to help you estimate how much sooner you can pay off your home loan, if you decide to make additional (extra) repayments.
You will see an estimation of how much
The length of your home loan term can be reduced by; and
The total amount of interest paid into your home loan can be reduced.
So, now that you have read this article you should be able to fully understand that making additional monthly repayments on your home loan can make a huge difference in enabling you to get rid of your home loan and live debt-free sooner. Whether you make this by any of the following means, the financial benefits to you can be considerable:
• By regular monthly additional payments; or
• By irregular one-off payments and whenever you have some spare money (i.e. you may receive a windfall or an inheritance).
Seek Expert and Professional Advice
If you would like further advice regarding your own unique personal financial situation you should always seek help from a professionally qualified finance broker.
http://www.singhfinance.com.au is a reputed Australian finance brokerage firm that employs a team of expert and professionally qualified finance brokers. They have a thorough knowledge of what the standard requirements are for home loans and they can guide you through the “Extra Repayments Calculator” and also your options in making additional repayments so that you can repay your home loan sooner. Call on 0424 190 908 today or visit their website and simply click on the "ENQUIRE ONLINE" form.
Disclaimer: This article is of a general nature only and does not constitute professional advice. I strongly recommend that you seek your own professional legal and accounting advice in relation to your particular circumstances.
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