Taming the monster

You've taken the plunge and bought yourself a place to truly call home. Top stuff. Now all you have to do is pay off that loan. Here's how to make your life that much easier.

 5 smart ways to tackle your home loan

(Examples are based on a $200,000 home loan at 9.40% p.a. fixed 2 years for a term of 30 years).

1. Make payments fornightly.  If paying monthly, by paying half of your monthly repayments on a fortnightly basis, you end up making more repayments a year. So, on a $200,000 home loan, you can cut nearly 9 years off your loan – saving just over $138,000 in interest payments!
2. Increase your regular payments.  By paying an extra $40 a fortnight on a $200,000 home loan would leave you debt-free 6 years earlier and save you 25% in interest.
3. Shorten the term of your loan.  By reducing a 30 year loan to a 20 year loan, you could save as much as 39% in interest or just over $155,000!
4. Maintain payments at the same level when rates drop.  You'll save money on interest and pay off your loan faster.  Just pretend your rate never dropped in the first place and you'll be paying off that loan in no time.
5. Pay off lump sums when you can.- On a floating interest rate:  With a standard variable interest rate, or revolving home loan such as Orbit and Orbit FastTrack, there are   absolutely no penalties for early or lump sum repayments.
   - On a fixed interest rate:  Increase the repayments on your fixed rate home loan by up to a further $1,000 per month or $500 a fortnight; with no penalties (however, keep in mind that any increase ust be for the remainder of the fixed rate term).  So if you can't keep up the increase, you can save any extra money and make a lump sum payment when the term ends.

When you need a break you can always take a repayment holiday
Any reasonable mortgage provider will let you suspend your interest and principal instalments for up to 3 months.  Don't jump for joy too soon though.  The suspended principal and interest instalments will be added onto the term of your loan and interest will continue to gather on your outstanding principal during the 'holiday'.

Top up your home loan
Home loans aren't just for buying homes.  No, no, no.  You can use them to get whatever you want in life, when you want it, just use your home as security.  As long as it's not used for business purposes you can borrow additional money and spend it on what you want...a holiday...new car...

 By the iwantahome.co.nz Editor

Posted: 3 Oct 2008

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