So you've taken the plunge and bought yourself a place to truly call home. Now all you have to do is pay off that loan. Or maybe you've had a mortgage for a while, but are feeling the pressure of the current higher interest rates. If either scenario fits, here are a few ways to make your life that bit easier:
1. Make some payments fortnightly
By paying half of your monthly repayments on a fortnightly basis, you end up making more repayments a year. This means you could cut nine years off a $200,000 home loan and save $138,000 in interest payments!*
2. Increase your regular payments
Paying an extra $40 a fortnight on a $200,000 home loan would leave you debt-free six 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 watch your loan disappear a little more quickly.
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. If you can't afford an increase, you can simply save any extra money and make a lump sum payment when the term ends.
For more tips and tricks about the process of buying, building or selling a home, visit www.iwantahome.co.nz. Here you'll find all the essentials.
* Examples are based on a $200,000 home loan at 9.40% p.a. fixed for two years for a term of 30 years.
Important disclaimer:
The views expressed herein are those of the authors and are based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are not necessarily the views of ASB Bank Limited and are given with an express disclaimer of responsibility and no right of action shall arise against any of the authors, ASB Bank Limited or its employees either directly or indirectly out of any views, advice or information.
