Pay mortgage payments weekly/fortnightly to save thousands!
By paying your mortgage payments weekly or fortnightly you could save thousands! The more regularly you make repayments on your loan the less interest you will accrue and the quicker you will reduce your mortgage and build up your equity. We recommend to our members to pay their loan weekly or fortnightly rather than monthly and following is an example on how much you can save by following this suggestion.
Jonny and Jenny have a home loan $350,000 with an interest rate of 4.95% and a loan term of 30 years.
Let’s do a comparison on what the difference would be:
Paying monthly $1,868.19
Loan term 30 years
Total cost of loan $672,550.20
Total interest payable $322,550.20
Paying Weekly $467 (monthly total divided by 4 and paid every week of the year)
Loan term would decrease to 25 years 4 months
Total cost of loan would decrease to $613,417.00
Total interest payable would decrease to $263,417.00
Loan term decreases to 25 years, 4 months
Interest payable would decrease by $59,133.20
That is an incredible saving!!
At the end of each week or fortnight if you have money left over in your budget put it onto your loan. Even if it is only $10, that can save you over $10,000 in interest payable over the term of the loan. By foregoing 2 bought coffees a week you have saved that $10 to put onto your loan.
Throw your spare change into a jar and at the end of each month put it onto your loan. Every bit helps to lower the term and interest payable on the loan.
While these examples are on your home loan the same applies for any loans you have. You will feel empowered just by putting on little bits of extra payments here and there and when you get into the habit you start challenging yourself to see if you can put more on this month than last month and before you know the loan is paid out and you have saved yourself lots of money on interest payable. Money that you can spend on other things that are important to you, better in your pocket than your financial institution.
Want help? Come and see us or give us a call on 5499 8988.