Buying your own home is the Great Australian Dream. However, it comes with a sacrifice for most of us, i.e. we need to go into debt to get it. The thing is, we often collect other debts along the way such as credit cards and personal loans. This is an increasing trend - people borrowing for lifestyle purchases. Now it's time to get reverse that trend and reduce these debts.
The benefits of having equity in your own property can be numerous, from simply giving you peace of mind through to allowing you to purchase investment property.
Debt reduction is actually easier than it's sounds - it's not rocket science. It just needs understanding and committment to the cause.
For example, a loan of $500,000 will cost you $1,342 per month over 30 years at 5.00%pa interest. How do you halve that term? Paying only $147 per week extra will do it for you. For a fairly small sacrifice each week you can reduce your debt by 15 years! Again, it's not rocket science. You just need to know your figures and have a plan.
Other tips would include:- know where your money is going by setting a budget.
Pay as much as you can into the home loan to reduce the principle therefore reducing the amount of interest charged. - consolidate any personal loans or credit cards into the home loan to take advantage of the cheaper interest rate. The key here is to KEEP YOUR OVERALL REPAYMENTS THE SAME. You'll be surprised how fast you can repay the whole debt with a simple debt consolidation and planning- have a close look at your home loan features.
Things like 100% offset accounts or the ability to make extra repayments and redraw can also help reduce the term of your loan.
Loan structure can also be very important. A loan of $500,000 may look insurmountable. But how about a loan of $50,000? By breaking your debt into smaller chunks you are setting yourself more attainable goals. For example, why not have a variable rate loan of $50,000 with the goal of paying it off in say 2 years? The remainder of the debt will still be there of course, but you can worry about the next $50,000 in 2 years time. By breaking your loan into small easily managed chunks the hurdles are nowhere near as high.
Having a professional financial planning / mortgage broking team really can help you with your debt reduction. They can also help you reach future goals such as property investment or other wealth creation. Loan structure can play such a big part of your financial freedom and it's worth calling in the experts. They are in business to save and make you money (otherwise why would you do it?).
If you would like to know more please email email@example.com at Mortgage Choice in Gymea, or call the team on 02 9525 4544. We're always happy to help. www.mortgagechoice.com.au/ben.herden- See more at: https://www.mortgagechoice.com.au/ben.herden/blog#sthash.tmjNcekn.dpuf