How to Really Pay Your Loans Off Faster!
Saturday, November 04, 2006
You may have noticed advertised, various elaborate ways to pay off your mortgage.
Allow me to clear something up….
The most effective way to pay your home loan off FASTER is by paying over and
beyond your minimum repayments – that’s it! By paying as little as an extra $20
per week on a $300 000 loan, you will cut 3.5 years off the term. Half your monthly
repayment and pay fortnightly and you’ll save another 6.3 years.
Borrowers need to be particularly diligent when looking at setting up facilities such
as an Offset Account.An Offset is like a normal bank account that is linked with your
Home Loan. The money that sits in the Offset Account is essentially offsetting against
the balance of your home loan.
Eg: Home Loan balance: $300 000
Offset Acount balance: $5000
You pay interest on: $295 000 (interest is calculated daily and charged monthly)
To maintain an offset account you will spend between $180 and $380 per year – most
are over $300. So for it to be saving you money you want to be keeping a minimum of
$5000 per year in the account at all times ($5000 x 7% saving = $350 saving per year)
If you don’t have that kind of money sitting around, or cannot control the temptation
to spend it, there is a great alternative…. a Basic Loan.
A good basic product will have a low ongoing rate, no application or exit fees, no ongoing
fees and no redraw fees. This means you can pay any extra money you have into the
loan, and then redraw it if you need it….but only if you really need it!!Put the $300 that
an offset account would cost you into your loan and it will cut 1.2 years off your loan
straight up!
posted by Daniel Serratore @ 4:10 pm,
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The Author
Daniel Serratore
Daniel is heading up the new generation of Finance Brokers in Sydney. With his fresh approach and "can do" attitude, Daniel has developed relationships with key people within the Sydney lending market which enables him to source great deals for his clients. Daniel is big on customer service and has built his business purely by referrals from clients and other businesses. You can catch him via the email link on the top of this page
About This Blog
This blog was developed as a resource for our clients and the general public. Although the internet will provide you with many lending providers, I am still to find a resource that shares ideas, tips and general useful info to assist borrowers make the right decisions. Hence this blog was born!
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