Why Pay A Lump Sum Off Your Home Loan?
Use the above lump sum and extra repayment calculator to work out how much interest you can save, and how much sooner you can pay off your home loan.
You may be surprised how much time and money you can save by throwing an amount like your tax return off your mortgage. You may not expect to receive any lump sums, the chances are you will receive some during the life of your loan. They can be unexpected and the urge might be to buy the latest phone, laptop or car. However paying that lump sum off your mortgage can have a massive affect on how much interest you end up paying, and help you pay your loan off much sooner.
Some of the ways you may be able to pay lump sum chunks off your mortgage are by receiving;
- Yearly tax returns
- A redundancy payment
- An inheritance or gift
- End of financial year Family Assistance payments
- Selling items you may not need anymore
At the start of your home loans life, even your minimum mortgage repayment is likely to be higher than it would be to rent. However, it won't always be that way. Check out our Renting vs Buying Calculator to see for yourself. Going without things you want so you can pay lump sums of your home loan is difficult, it takes willpower. The temptation to spend it is real, but remember every bit you pay off your loan decreases the interest you pay.
At an interest rate of 5%, every $10,000 extra you manage to pay off your mortgage you will save a little over $40 of interest a month. After you've paid $20,000 extra off your loan you'll be a bit over $80 better off every month. Your sacrifice in the beginning soon pays off.
Read The Barefoot Investor
If you're serious about paying your home off sooner, read The Barefoot Investor by Scott Pape. It's a humorous guide to money that gives you the tools you need to pay your debts off and own your home sooner.
In The Barefoot Investor Scott recommends contacting a cash-back mortgage broker so that you receive the trailing commission refund on your loan each month. That's what we offer at Cash Back Mortgage Broking. Read about how a cash-back home loan works here.
A cash-back mortgage broker will be happy to chat to you about the best types of home loans for making lump sum and extra repayments, and the lowest home loan interest rates available. Just give us a call or use the contact us page.