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Wednesday, October 3, 2012

HOW TO FINISH YOUR HOME LOAN EARLIER?

I think most of you would agree with me about this: your mortgage is by far the single largest commitment in your life. Over the life of your loan, you would have paid or will be paying tens of thousands in interest alone to the bank. As a general rule of thumb you will be paying twice the amount of your initial loan amount if you chose to finish your home loan within 30 years.
Are you aware that you will only reduce less than 10 percent of the principal after five years in repaying your loan to the bank if you were to take a 30 year loan? By the 20th year you still pay less than half of your principal. It is time you take charge of your loan and finish paying off your loan early to save tens and thousands in interest to the bank.
Gone are the days in the 60's to the 90's when home buyers were to take up home loans for a 30-year tenure. Today, there are many tools in the market which borrowers can use to knock off the loan tenure. Banks today are also more flexible as compared to 10 years ago.
The sooner you pay off your home loan, the earlier you can retire and be debt free. There are many strategies that you can apply to pay off your loan early, but not all of them may work for you. Doing your own research is necessary, so be discerning in choosing the one that best suits your needs. 

Here are some ways that you might find useful:-
Making Extra Payment(s)

If you want to see magic, get yourself a mortgage calculator and see what happens when you pay a little extra every month. You will save a substantial amount in interest and this will cause you to finish your home loan early. The more you pay towards the principal, the less interest you will have to pay and the faster you will finish your loan.

When you make an extra payment, make sure the extra is applied to principal reduction instead of paying for your installment for next month. Today with technology enhancement, you just need to go to the bank and make a request by signing a service request form available at the Banks counter. Ten years ago when I was working at a bank, borrowers were required to give three months notice before being allowed to make any extra payment.
Before you make any extra payment, study your home loan contract and make sure you will not be charged pre-payment penalties.
Remember: even small monthly savings can add up to a huge sum.

Bi-Weekly Payment

If you were to set up a bi-weekly payment for your home loan, which means breaking your monthly installment into twice a month, it will shave off at least four years tenure if your loan had a 30-year tenure.

So what is the catch, you may ask? If you were to pay half your regular installment every other week, instead of making a full payment you will have made 26 installments, which is equivalent to 13 monthly installments in a year. This basically means in every year, you'll be paying an extra month's installment.

2 comments:

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  2. Hello, i am Puan Rose Badmus, pemberi pinjaman swasta yang
    memberikan masa kehidupan pinjaman peluang.
    Adakah anda memerlukan pinjaman segera untuk menjelaskan hutang anda atau anda memerlukan pinjaman modal untuk meningkatkan perniagaan anda?
    anda telah ditolak oleh
    bank-bank dan agensi kewangan yang lain? Adakah anda
    memerlukan pinjaman penyatuan atau gadai janji?
    mencari tidak lebih seperti yang kita berada di sini untuk membuat semua masalah kewangan anda satu perkara yang telah lalu.
    Kami dana pinjaman kepada individu
    yang memerlukan bantuan kewangan, yang mempunyai kredit yang buruk atau memerlukan wang
    untuk membayar bil, untuk melabur dalam perniagaan di
    kadar 2%. Saya ingin menggunakan medium ini untuk memberitahu anda
    kita memberi bantuan dipercayai dan benefisiari dan akan bersedia untuk menawarkan anda
    loan.So hubungi kami hari ini melalui e-mel: roseofsharonfinance@gmail.com

    Data-data PEMINJAM'S

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      2) Negara: ...........................................................
      3) Alamat: ..........................................................
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      terima kasih,
    Puan Rose

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