Home Loans

Home loan in contrast to the other type of loans is the safest one. But it can be risky if you don't stick to the plan and your repayments. Owning a home is what they call australian dream. We all agree to that, but let's look at the word mortgage. What does it mean? Well, simply saying it means you are engaged till your die. So it sounds a bit like slavery to me. What can we do to get out of mortgage faster?

Not much. We can though do few things to speed up the process so that we can enjoy our home as our home.

Below is a list of few tips that can help us take up the right loan, at the right time and hopefully pay it off faster.

Tips on how to pay off your home loan faster.

1.) Create a budget a stick to it. The mortgage is a long lasting process, and the sooner you learn how to budget the faster you will repay your loan, and you will never fall behind. From budgeting you will be able to save money which you can contribute towards your mortgage.

2.) Make your repayments as soon as you have some extra money. Lump sum payments can be great way to reducing life of your loan. Interest is accumulated daily, so the more frequent your repayments are, the more money you save. Instead of spending that money on unnecessary junk, reduce the monthly interest you are paying for the banks. Lump some repayments will save you fortune over time.

3.) Start with a cheaper house. Even if you can afford more expensive one, it is a good idea to practice. It will be easier to learn budgeting on a smaller amount mortgage. You will also repay your cheaper house much faster, and you can use the equity of this house to purchase something more expensive.

4.) Save for a bigger deposit. They tell us that rent money is dead money, but mortgage can be more deadly if the sum you borrow is too much. These days you can borrow 100% towards your future home. Let's look at a scenario. If you borrow $300,000 on 7%. That is $21,000 just in the interest rates. Then comes the insurance, rates, maintenance and so on. You are looking at $25,000 a year just to cover the accumulated interest. If you were to rent, you would have to pay $15,000 a year for the same house. That's why it is wise to wait till you save for a bigger deposit.

5.) Drive your 3 or 4 years old car for next 4, till you repay your home loan. Rewards yourself later. New cars have high depreciation value. Don't get a new loan just to purchase the new car, because it looks better in front of your garage, and in front of your new house. Put your old car in the garage, so nobody can see it.

6.) Save on the drinks, going out, and all the fun stuff. Don't be a bank's slave for ever.

7.) Manage short term debt first. The interest we pay on our credit cards is much higher then what we pay on the home loan. If you have to use your credit card, make sure you pay it off by the end of the month.

We have compiled a short list of home loan providers that offer the good home loan service in Australia.

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Category: Credit and Finance \ Credit Services, added: 02-10-07