Finding a home that’s more than just a roof above your head is every homebuyer’s lifelong dream, but the journey doesn’t end there. If you (like many practical buyers) applied for a home loan instead of paying fully in cash, the entire payment process can take at least 5 more years. Depending on your financial situation, that duration can seem like eternity. But it doesn’t have to be.
To help ease the burden and stress over your newly purchased house, below are useful tips on how you can pay off your home loan faster and easier:
1. Opt for shorter payment terms.
When it comes to any kind of loan, time is definitely of the essence. If you’re strapped for cash and looking for more opportunities to earn money while paying for your loan, you might be thinking about spreading your payments across a longer period. However, choosing a long payment term also means a higher payment total.
On the other hand, a short-term loan means lower costs. For example, if you choose a duration of 5 years instead of 10 or 15, you can save as much as 12% of your supposed total payments. Depending on the size of your loan, that amount can be huge! That’s not to say that choosing shorter tems is the best for every situation. You will have to shell out larger monthly amortizations, but at least you’ll manage to get the home loan off your mind as quickly as possible.
2. Make more frequent repayments.
A good strategy in finishing off your home loan faster is by making fortnightly repayments instead of monthly–that is, twice a month or every two weeks. Divide your monthly amortization into two and religiously pay that amount every two weeks. Since there is a total of 26 fortnights in a year compared to only 12 months, you wouldn’t actually notice that you’re speeding up your payment process by covering an extra month annually. Aside from saving you time, this practice also nets you lower interest costs.
3. Take advantage of lump sums.
Lump sum payments–or a big one-time payment of your loan–can come from your 13th month pay, mid-year bonuses, tax returns, pension, inheritance, or any other big influx of cash. If you have no other immediate need for the lump sum you just received, it might be best to allot it to your outstanding balance. This way, you can make the money work for you and get interest savings by paying off the mortgage at a shorter period.
4. Reduce your monthly expenses.
In other words, be frugal. Start by cutting down on your daily expenses by taking the train to work instead of riding a cab, packing your own lunch rather than eating out, or maybe even skipping the morning coffee or afternoon merienda. We know, it’s hard, and it’s even harder if you’ve grown accustomed to care-free spending habits. Just keep in mind that this is the price that you have to pay for getting a space that you can really call your own.
But don’t, I repeat, don’t deprive yourself. A little luxury goes a long way in achieving long-term financial goals (and preserving your sanity). After all, rewarding yourself is also an investment. We’re merely proposing that you realign your priorities, at least until you finish paying off your loan.
5. Keep an eye out for bank offers.
Nowadays, banks are fond of offering enticing home loan terms to attract potential buyers. For a homebuyer such as you, this is very good news. Security Bank, for instance, has a 6 for 5 Anniversary Promo ongoing until the 15th of December. The promo currently offers the lowest home loan interest rates in the market: It allows you to make the most out of your hard-earned money with fixed interest rates of 5% for 1 year, 5.5% for 3 years, and 6% for 5 years.
Not only does Security Bank make the process easier by granting a loanable amount of up to 80% of the total property value, they also give fast approval on your home loan application. The special promo, which can save you more than a hundred thousand pesos, is open to everyone applying for either a home loan or home equity loan.