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Pay Off A Home Loan Faster!
And Own your Home Sooner!
So, you're looking for your dream home, and a home loan to finance it with- and then you will need to face the daunting prospect of paying off that loan... maybe for the next 25 or 30 years!
Like most people, you would probably like to accomplish your home loan repayment in a shorter time period- preferably a much shorter time period.
One of the first steps you can take towards this goal is to find a home loan with cheap interest rates. An extra .5% may not sound much, but it can make a lot of difference, especially over the lifetime of a
loan. Honeymoon or introductory rates are fine to get you off to a good start, but it's the ongoing rate after this initial period that is really important for long term savings, and quicker pay off.
Try to really research low interest rate loans well yourself, as banks and mortgage brokers won't always publicise them, or offer all possibilities in one place, as more money is naturally to be made the higher the interest rate, and the longer you are kept committed to the loan.
Refinancing may seem attractive, if someone is offering you a better rate, but make sure you fully understand all the hidden costs first- such as termination fees and other legal fees for discharging the mortgage and costs associated with the new loan such as stamp duty, application fees, valuation, legal fees.
Be aware that those trying to sell you on the new loan are usually trying to earn themselves a commission- it isn't your personal welfare they have at heart! You may not necessarily actually end up better off- maybe even worse- and there's a lot of hassle involved. Also, do not be convinced into paying anybody a fee for this kind of advice. Find a mortgage broker who doesn't charge fees from the borrower.
The other way that you can make huge savings, both in money and time, is by making as many extra loan repayments as possible, especially in the earlier years. These can help take years off your home loan! In most cases, it's more beneficial to put spare money into paying off your loan sooner, than investing it in savings, especially if your loan also has a redraw facility- in case of emergency! Make sure that you specify that these extra payments are to be taken off the loan principle, not the interest.
Try to get a loan that allows unlimited, unrestricted extra repayments. Some loans do not allow them at all, or only allow extra payments up to a certain amount, and many may charge you fees for paying out the loan early.
Making extra repayments might seem a bit of a strain on the finances, but they will truly be worth the effort and temporary "going without", for the huge benefit in years to come. And it's good to try to get as much extra repayment done early, before the demands on your finances increase- such as if you decide to have children.
Have a look here for some simple ways to save money and pay off your home loan earlier.
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