It is worth taking a home loan, for moving into your dream home. However, paying off home loan for good 20-25 years is daunting task and paying it off as soon as possible requires planning and detailed understanding of the complete loan process. Here are some tips that can help you.
Pay it off quickly - The basic rule with loan, be it home loan or any other loan is, and pay it off as quickly as possible. The longer you take to pay off your loan, more is the amount you are going to pay. For instance- if your loan amount is $600,000 at 5.46% percent for 25 years, then your monthly repayment will be about $3,670. If you pay the loan back in 10 years rather than 25 years then your monthly payment will increase but you will be saving a lot of amount in totality as in this case your rate of interest will be low.
Consolidate your debts - If you are paying other personal debts too like credit cards, store cards, personal loans etc.) Then you must be paying between 15-25% interests on these personal debts. Instead of paying a high interest rate, you can refinance all your debts into your home loan. This means by consolidating other debts into your home loan, you need to pay only 5-6% interest. With this strategy, you can save a whopping amount while saving yourself from higher personal interest rates and unaffordable debt.
Use your offset account to your advantage - You can use your offset account to your advantage, instead of keeping all your spare cash into an interest bearing account where you will earn a little amount of interest, and in turn will be paying tax on the amount you earn, transferring the extra cash into your offset account will work in your advantage. Making use of this additional cash to offset the interest you are paying on your home loan will be the best possible option.
Split Loan - Split loans in another great option, giving the borrower immense flexibility and advantage. In split loans, you can fix part of your home loan and set the remaining balance of the loan with the variable rate of interest. In case, interest rates go down in the coming months, then you stand to gain from it, this gives borrower enough flexibility, as you know some part of your loan is safely fixed and other is variable.
Pay it off quickly - The basic rule with loan, be it home loan or any other loan is, and pay it off as quickly as possible. The longer you take to pay off your loan, more is the amount you are going to pay. For instance- if your loan amount is $600,000 at 5.46% percent for 25 years, then your monthly repayment will be about $3,670. If you pay the loan back in 10 years rather than 25 years then your monthly payment will increase but you will be saving a lot of amount in totality as in this case your rate of interest will be low.
Consolidate your debts - If you are paying other personal debts too like credit cards, store cards, personal loans etc.) Then you must be paying between 15-25% interests on these personal debts. Instead of paying a high interest rate, you can refinance all your debts into your home loan. This means by consolidating other debts into your home loan, you need to pay only 5-6% interest. With this strategy, you can save a whopping amount while saving yourself from higher personal interest rates and unaffordable debt.
Use your offset account to your advantage - You can use your offset account to your advantage, instead of keeping all your spare cash into an interest bearing account where you will earn a little amount of interest, and in turn will be paying tax on the amount you earn, transferring the extra cash into your offset account will work in your advantage. Making use of this additional cash to offset the interest you are paying on your home loan will be the best possible option.
Split Loan - Split loans in another great option, giving the borrower immense flexibility and advantage. In split loans, you can fix part of your home loan and set the remaining balance of the loan with the variable rate of interest. In case, interest rates go down in the coming months, then you stand to gain from it, this gives borrower enough flexibility, as you know some part of your loan is safely fixed and other is variable.
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