In all the excitement of finding the perfect property and getting settled in, it’s easy to forget you have to actually pay back the loan. When the reality of having a mortgage hits, don’t panic, there are plenty of ways to reduce it quickly. Your home loan doesn’t have to feel like a weight hanging over your head for the next thirty years.
Every loan comes with an interest rate. The higher the rate, the longer it may take for you to pay off. When you first take out a home loan, you can improve your chances of a low rate. A large deposit and a sparkling credit rating – these will show the lender you can service a loan with minimal risk.
If you couldn’t get the lowest possible rate when you first took out your mortgage, consider discussing refinancing with your loan broker. Refinancing your current mortgage when interest rates are low is a great way to reduce how much money you’ll have to pay back over the life of the loan.
Loan terms are related to interest. The longer you take to pay back your loan, the more time there is for interest to build up. It’s a good idea to choose a shorter repayment period.
Of course, a shorter loan term will mean paying more each month, as you’ll have less time to pay off the full amount of your mortgage. But it’it’ll help you pay off your loan faster and keep money in your pocket in the long run.
Another way to pay your loan off quicker is boosting your monthly loan payment. Instead of opting for the bare minimum, add a little extra to your payment each month. A slight increase, for example adding $50 to each, could get you one month closer to home ownership. That means you’re out of debt faster and there’s less interest to pay off.
Another option is to sneak in an extra payment. 13 minimum payments a year instead of 12 will help you pay off your mortgage faster.
However, before you go and double your monthly payment, make sure there are no penalties or fees involved with paying off your loan earlier. Some mortgages feature conditions regarding exactly when it can be paid off, so give your broker a call before beginning any faster payment strategies.
Story from Loan Market.