You want to pay off your home loan as soon as possible. Problem is, you don’t have enough money in your bank account. If you’ve been wondering about how to pay your home loan fast, then this article has the answers you need.
Choose a home you can afford.
You might need to rethink your choices if the price of your dream house puts you in too much debt. You need to look deep into the future and wonder if you can afford a home loan at double the interest rate. They were about double what they are now around 6 years ago. Shop around before making a big decision. It also helps to crunch some numbers with a mortgage broker so you have a better idea of your own financial ability.
Select shorter payment terms.
Don’t underestimate your working years. This is the time when you are most productive. A good amount of money flies in and out of your hands without you even noticing it. Why not put that into good use? Like, say, paying your home loan off? A shorter payment term looks expensive, but it’s actually more affordable. For instance, it lets you get away with paying less interest. The banks make massive profits by keeping you in debt for longer! If you need inspiration, think of how old you’ll be at the end of a 30 year loan term!
Refinance your home loan.
This is were most Aussies have their lazy boots on. Refinancing your home loan can save you a ton. Not only can it shorten the loan period, but it saves you from higher interest rates as well. Saving on interest allows you to filter all those savings back into the loan. Refinancing can actually allow you to compound your savings!
Make more payments.
Got extra cash lying around? Use it to pay a part of your home loan. One payment might not look like much from the start. But, if you continue this habit as the years go by, you won’t need to worry about your home loan as you get older. Even an extra $20 regularly will make a difference as it compounds your savings over the loan term.
Use lump sums.
Are you expecting to receive a big amount of money soon? Don’t spend your inheritance, performance bonus, or company profit sharing without a thought. Make the smarter choice by paying your home loan. It will chip off a sizable amount from the total cost and shorten your payment by a couple of years.
Put your tax refund to better use.
As I’ve mentioned earlier, lump sums are a great way to complete your home loan. But, for most people, that’s easier said than done. Not everyone has a stack of cash lying around, but almost everyone gets a tax refund. Making that extra payment is sure to finish off your home loan early.
Reduce monthly expenses.
Thinking about how reduce our expenses is like dragging finger nails over a chalk board. However, going through the pain of making sure your not paying to much will make you much better off in the long run. For some people it can take 5 years off their home loan.
Rent out extra space.
Do you live alone? If you don’t mind the company, or you’re often away for business, you can rent out your property for extra cash. For added cash flow, you can even go all out and rent out an entire section of your home!
Check with you Mortgage Broker for bank offers.
Some banks award lower home interest rates as a promo for potential buyers, so be sure to keep an eye out!
A lot of people think that paying off a home loan fast is impossible. I say, if you have the will to do it, you can do it. All it takes is the right approach. In case you have concerns about your home loan, you can reach out to me. Being a mortgage broker, I am happy to give advice that applies to your specific situation.
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast which you can check out here.
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