Banks will generally structure a home loan for a 25 to 30 year term, which allows them to maximise the amount of interest repayments that they will receive from you over the life of the loan.
For example, you will pay a total of $630,000 in interest over the 30 year loan term for a $300,000 mortgage at an average interest rate of 7%.
Reducing the term of your mortgage by paying off the balance quicker is one of the best ways to reduce the interest you pay over the course of the loan.
Over the next couple of months I’ll be giving you little tips on how to reduce your mortgage quicker.
MAY mortgage tip: pay your mortgage weekly or fortnightly, never opt for monthly. Some months have more than 4 weeks which means that if you pay fortnightly you will average 2 more repayments per annum and therefore start eating into your principal amount faster.
Stay tuned for more Blossom tips on how to reduce your mortgage next month.