Home Loans – Does It Pay to Pay More?
Before you think I’ve gone completely off my trolley and go back to searching for barbecues, garden furniture and exterior light fittings . . . hear me out.
These days many home loans are taken out over a period of 20, even 30 years, and let’s be honest, how many people stay in the same home for 30 years, except for my paternal grandmother who lived in the same place to raise her family, enjoy visits from the grandchildren, the great grandchildren . . . no sense of adventure some people, but you always knew the address to send her Christmas cards. Anyway, if the thought of living in the same house for 30 years or more fills you with dread, how about the thought of paying for it every month for 30 years . . . help!!!!
Well, smarty pants, this is one situation where paying more can definitely mean that you can pay less over the long term. If you pay one extra payment per year, then you can knock years off the term of your mortgage – sounds simple doesn’t it, and it is (as long as you can manage the extra payment). You’ll end up paying less too, just think of all that interest you’ll be saving. You see, any extra payments you make will reduce the principle amount of the loan, which means that any amount of interest will be added onto a smaller top figure . . . confused? Okay, well it’s not rocket science but it does work and can make a terrific amount of difference to the amount you actually pay out for your home.