The article in the latest Australian Property Investor Magazine (November issue) has some great tips to half your home loan and of course speed up your wealth creation process. A 30 year loan can mean for most people they are paying off more than the original loan amount in interest over the term of the loan. What a scary thought! Let’s take a look at their 16 Top Tips to repay the loan in record time.
- Make fortnightly repayments instead of monthly. You will make an extra repayment without noticing it and reduce your interest bill by thousands of dollars.
- Make more than the minimum repayment. Even rounding up to the next $10, $50 or $100 makes a difference.
- Put every spare cent into your loan: Tax refunds, dividends, pay increases, and any excess funds. (With a redraw facility, this money can be taken out later if needed but saves interest in the mean time.)
- Make your first repayment on settlement day. This reduces the principal before the first lot of interest is incurred.
- Pay loan establishment fees and legal fees upfront instead of tacking them on the loan.
- Shop around for the loan with the lowest interest rate and with features you actually need.
- Look for loans that offer features, such as redraw and unrestricted extra payments at no extra cost.
- Review your loan annually to see if a better deal is available but aware of any switching costs.
- By depositing your pay and living off a credit card with 55 interest- free days, the offset saves interest.
- When taking out a fixed home loan, only fix part of the loan so you can make extra repayments on the unfixed portion without penalty.
- Make use of internet banking to manage your balance and make extra repayments
- Don’t lower your repayments if interest rates fall.
- Align your repayments with your pay day or income cycle to minimise interest.
- If refinancing, make sure you really will be better off; don’t get ‘churned’.
- Look for a loan with portability. This will allow you to transfer to a new property without paying exit and entry fees. Most people don’t stay in the same house for 30 years.
- Temporarily park funds in an offset account to reduce your principal.
Some of these simple tips I have already been using and they have saved me hundreds of thousands of dollars over the years so I hope that they do the same for you!