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homeloan |
Many of today’s loan products let you take money out of your mortgage for needs like a car or school fees. These are great features – as long as they don’t stop you paying off your loan. Will you be strong enough to resist the temptation to use the money that’s available? Now’s the time to know your limitations: if you can’t discipline yourself to repay fast, you might be better off with a less flexible loan. And because it’s less flexible, that homeloan will probably have lower rates and fees. A home loan - sometimes called a mortgage - is simply a long-term loan. You get one through a bank, credit union or other financial institution. Although it is likely to be the biggest loan you ever have, it is designed to be paid off slowly through manageable monthly or fortnightly repayments. Do I have to sacrifice my normal spending for a homeloan? Of course you would have to dedicate some of your income towards your homeloan but not everything. Budgeting: the great loan buster You've probably heard it all before, but a simple household budget should be the cornerstone of your home loan strategy. Budgeting will allow you to save whatever is left over at the end of each month. That money can then be put to work for you via a mortgage offset or all-in-one account. If a 25-year home loan seems like a life sentence, don't despair. You can save thousands in interest and cut years off your loan with some simple strategies. All it takes is some basic financial planning and a bit of discipline. Take the case of Chris and Sue. They wanted to pay off their 25-year, $100,000 home loan quickly but could not afford higher monthly repayments. Instead they decided to put Sue's annual $2000 tax return straight into the loan. This strategy will cut the loan term by nine years and save almost $45,000 in interest (presuming seven per cent interest over the course of the loan). All this without having to sacrifice dinners out and the occasional family holiday. |
