4 Tricks to Reduce Pressure from Your Home Loan Repayments

by Allan Jones
(Australia)

“How do I repay my mortgage sooner”, is a question that a lot of people ask. Here we will reveal the secrets to pay your mortgage faster that most lenders will not tell you. This is because they want you to have the mortgage as long as possible so they earn lots of money from you and do not have to go and find someone else to loan their money to.


Trick 1: Take Loan for a Shorter Term and Increase Your Down Payment
Taking out your mortgage for a longer term means your repayment will be lower but if you can afford the higher repayment, it can be a good idea to drop the mortgage period to a shorter term. Compare a 15-year mortgage to a 20 and 30-year mortgage and you will find that the amount of interest you save will be worth the higher repayment. Increasing your down payment (house deposit) to as much as you can afford means that you will be able take out a smaller mortgage. This means you will not be paying interest on the money you did not borrow.

Trick 2: Downsizing
Selling your home to either rent or purchase a smaller home with the equity that you’ve built up is the fastest way to get out from under a heavy mortgage. Unfortunately, if you currently owe more than your home is worth, this might not be an option (or at least not as simple or pleasant).

Trick 3: Pay As Much as You Can Whenever You Can
Making unscheduled extra principal payments is great. In recent years, this method has received a fancy name: “debt snow flaking.” Some people like to look at these types of extra mortgage payments as an alternative to investing. Therefore,
* Increase your payment to the most you are able to afford.
* Make more mortgage payments.
* Keep your repayments the same when interest rates drop.
* Raise payments in line with increased income.
* Pay a lump sum whenever possible.

Trick 4: Refinancing
Mortgage refinancing is a great way to pay the current home loan or current mortgage loan that you have taken. For example if you have taken a mortgage loan of $600,000. After 3 years, you have paid back $300,000. For the remainder of the amount, you take another loan of $300,000 to cover the present loan; this is known as mortgage refinancing. There are several ways in which mortgage refinancing can be helpful.
1. To take advantage of a better interest rate (a reduced monthly payment or a reduced term).
2. To consolidate other debt(s) into one loan.
3. To reduce the monthly repayment amount (often for a longer term).
4. To reduce or alter risk (e.g. switching from a variable-rate to a fixed-rate loan)
5. To free up cash (often for a longer term, contingent on interest rate differential and fees).

As most individuals, Allan has a mortagage, which put some pressure on his cashflow. Last year, Allan refinanced his home loan using Uhomeloan. Since Allan loves sharing his experience online, he decided to write and article on the topic, hoping it would help others.

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