How to own your own home quicker

One of the biggest financial commitments most of us will ever make is the mortgage on our home. So it is no surprise that the potential savings from adopting a smart mortgage strategy can also be remarkable.

Take this example…

Steve and Nicole purchased a home for $500,000 and took out a mortgage of $350,000 repayable over 30 years. With an initial interest rate of 7.00% and monthly repayments, they found they would be paying around $488,000 in interest over the period of the mortgage. In fact their first monthly payment of $2,328 would be applied to interest of $2,041 and only $287 to repayment of the capital.

Whilst they realised they had no control over the basic loan of $350,000, Steve and Nicole certainly did have control over the interest they would be paying. In discussion with their finance broker they found:

1. Making fortnightly repayments of $1,164 (half the monthly payments) would save them $119,000 interest over the period of the loan, if all other factors remained the same.

2. Changing their repayments to weekly would only save approximately the same as fortnightly payments.

3. Renegotiating their loan with an interest rate 0.2% less (6.80%) would save them $17,000.

4. Increasing their monthly payments by $72 would reduce the term of the loan by three years and save them $54,000 in interest.

Armed with this information, Steve and Nicole set themselves a budget and found they could make the fortnightly payments and save the $119,000 interest.

They are conscious that any increased income from tax savings or future salary increases should be applied to the mortgage so that the outstanding capital amount will be reduced as soon as possible.

Keeping in touch with your finance broker can be vital in saving you money over the long term. Call us today to see how you can own your home quicker!

KK’s gut instinct

Financing at the moment is challenging to say the least, however I am noticing signs that there are greater demands on the front line to write new business, which should convert to a more competitive environment. I’d expect by year’s end that competition will drive financiers to soften their approach.

Sporting tip of the month

I can’t believe I’m saying this. After last weekend’s AFL games, Collingwood look a sure bet for the 2010 Premiership. Judd is a monty for the Brownlow and the Brownlow smoky is Pavlich at 126 -1. Good luck.

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