How to pay off your home loan quicker
Category Property Advice
Owning a home is an achievement to be proud of. One of the best investments you can make is to use any additional money to shorten the repayment period on your home loan. Whether you have a R2-million apartment or a R30-million villa, the sooner you pay off your bond the more money you will save in the years to come.
Here are some tips on how to pay off your home loan quicker:
Secure a low interest rate
The current interest rate is at a home owner's dream of 7%. It not only makes getting a home loan easier, securing the lowest possible rate with your lender is also a contributing factor to paying off your bond faster. Low interest rates allow you to save more money over a long period of time. The higher your rate the more money you will need to pay towards your total interest.
Therefore, it is advisable to negotiate for a favourable interest rate with your lender. Remember, the better your credit score, the more chances you have of securing the best rates.
Pay a lump sum
One way to reduce your loan term is to pay a big amount when you have extra cash. Instead of spending your Christmas bonus on expensive presents pay it towards your home loan. Perhaps you inherited a large sum of money or won a portion of the lotto, paying a lump sum into your bond will tremendously help bring down your total debt and reduce the interest owed.
For example, by paying a lump sum of R20 000 into a bond with R750 000 debt on a remaining term of 20 years at an interest rate of 7% with monthly repayments of R7000, the term should drop to 13.43 years - saving you about R531 907.
Pay a bit extra every month
If you have a little extra at the end of the month pay it towards your home loan along with your set premium. Investing that additional R1000 or so will help to shorten the repayment period of your debt. Paying a bit extra when you are able to can also help you build in a buffer for emergency circumstances.
Use your salary increases
A great way to lower your bond is to use your annual increase. If you can live a comfortable lifestyle without your increase in salary then it is wise to put your entire raise amount towards your bond balance. Before you commit to this strategy consider inflation costs of food and necessities too. In some cases, just a bit of your increase in salary would be a better option. You can add a portion of your increase to your existing premium. In this way, you still have extra money to spend on yourself and contribute to your goal of paying off your home loan quicker.
Sell your talents
Are you a gifted baker or have an eye for photography? Why not use your special skills as a sideline job to bring in extra revenue? Let us say that you enjoy doing family photoshoots and have extra time during the weekends. You can charge others R1000 per hour for a shoot. If you dedicate three hours on a weekend for this, times four weekends in a month, your extra income per month equals to R12 000. That is R144 000 for twelve months. Do not forget that people love photoshoots during the holidays too. Your home loan will be paid in no time.
Do not forget that your home will appreciate in value while you are paying it off. This ultimately means that you stand a chance of making a further return on your overall investment if you plan to sell. Interested in finding the home of your dreams? Contact Knight Frank Properties today and we will help you locate it.
Author: Knight Frank
