Strategies To Reduce Your Home Loan Debt

It’s completely possible to shave off a few years off your home loan debt, and even though repaying the full amount seems far away, you’ll be glad when you get to the end of it sooner than you planned.

According to Cannex, you can pay out your 25-year mortgage in 13 years instead. How?By maintaining your repayments last year before the interest rates started to tumble. The rates fell from 9.62 percent to 5.76 percent and when you look at the math, the minimum monthly repayments on a $300,000 loan fell from $2646 to $1797 per month. So hold off those holiday plans with the extra $848 and keep putting the money into your mortgage.

Before you buy

Reducing your home loan debt really starts before you sign the dotted line. Make sure you put down at least 20 percent of the property value as a deposit and as tempting as it is, don’t max out your borrowing power. That way you’ll be able to repay a smaller loan off faster.

Payment cycles

Choosing to make weekly or fortnightly payments also makes a difference because instead of 12 monthly mortgage payments a year, you’ll end up paying closer to 13 months. Over a period of 12 years, you’ll be freeing yourself from one year of repayments or more.

Short-term debt versus long-term debt

The other thing to keep in mind of course is to avoid overspending in other areas. So while an extra $50 a week going toward your home loan debt will help you repay your loan faster, there really isn’t any point in doing so if you end up having to pull out your credit card at the supermarket to cover the midweek groceries. Especially since credit card interest rates are much higher.If your credit card does get out of hand however, it might be worth incorporating your credit card debt into your home loan. While doing that temporarily increases your home loan debt, you’ll end up saving a fortune in credit card interest and be able to pour that money into your mortgage instead.

Refinancing your mortgage

Think twice before you consider refinancing in the first five years of your loan. Lower interest rates dangled in front of you may be sexy, but exits are a costly exercise if you make the switch in those early days. So wait it out, there are always good refinancing deals to be had.

What strategies do you use to reduce your home loan debt and pay of your mortgage faster?

Share with us your home loan reducing tips below in the comments area!

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