16 Aug How to pay off your home loan faster!!!
You must be wondering what is the “SECRET” to pay off your home faster.
Well it is not a secret, but a very simple strategy that most of us can follow by having an offset account that is tied to your home loan.
Simply channel all your money into that offset account and use a credit card for all your daily expenses and bills, and ALWAYS pay off the full credit card amount at the end of every month, with the money from that offset account.
What this does is that the money in your offset account will be offsetting against the outstanding loan balance, hence reducing the interest payable on that loan. For example,
Loan amount: $300k
Amount in the offset account: $50k
With the money in the offset account, the lender will only be charging you interest of $250k when the loan repayment is due.
Using the above example, based on a 30 year home loan with an interest rate of 4.24%, you would have shaved off almost 6 years in your home loan repayment period, without putting in any extra repayment.
This is not only an ideal way to reduce the interest paid on your home loan, it is also generating a higher return on your money. This is because the money in your offset account is giving you an interest rate equivalent to your home loan rates AFTER tax, which is much higher than most BEFORE tax interest rates that term deposit can offer today.