You’ve got your home and the home loan that made it all possible, but what plan do you have to pay the loan off sooner than the 30 year contract you have with your lender?
You don’t have to be a rocket scientist to figure this one out. While you owe money, the lender is going to charge you interest. So the sooner you can pay the loan off, the lower the amount of interest you end up paying.
Did you know on a $300,000 loan at 5% over 30 years with monthly repayments of $1,610, you finish up repaying $579,600? No wonder your lender loves you - $279,600 in interest. Do you run a business where you can almost double the return on your investment?
I’m not going to discuss the merits of weekly or fortnightly repayments here but if you want to investigate that refer to another of my blog posts HERE.
If you were to increase your repayments to $1,700/month, yes only $90/month extra, you reduce the loan term to just over 26 ½ years and reduce the total repayments to $543,456. A saving of over $36,000.
Why not be a bit more ‘adventurous’ and increase repayments to $2,000/month? The loan term now comes down to less than 20 years and total repayments are approx. $471,800. Wow, you‘ve reduced total repayments by more than $100,000. Your lender’s love for you will now be getting a little strained!
Let’s push it a bit further. $2,500/month reduces the total repayments to $416,700 and the loan term to less than 14 years. So you’ve reduced the loan term by half and saved over $160,000.
Do you want to learn more? Now is the time to have a good broker working for you. Contact Peter Ruddock on (03) 9877 6471 or firstname.lastname@example.org to discuss your individual circumstances.