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Strategy for family to save thousands of dollars

Oct 2, 2014 |

We see many people who in an attempt to save a little on their unsecured loans will make every effort to consolidate these into a slightly cheaper personal loan. However not as many borrowers wish to review the costs of their mortgage. Your mortgage is probably one of your largest expenses, and it is this loan that is likely to yield thousands of dollars in savings to the family budget, if you are prepared to take the time to review and compare.

Regular mortgage health check

The best way for you to save money and add thousands to the family budget is to regularly review the terms of your home loan and compare these to the loans advertised. The home loan market is very changeable. Providing your mortgage is not fixed, you are free to move between loans and lenders at next to no cost. It does take some time to get all the required loan documents together. However if you can save hundreds or thousands in one year, why would not you do that?

Consolidate unsecured debts into home loan

Consolidating unsecured debts into your mortgage is what is likely to yield significant savings. This is usually far better than consolidating into a personal loan. Home loan rates are almost always lower than interest costs of a personal loan. You do need to have the required equity in your property to qualify.

Ensure mortgage allows early repayment of principal

It s important the your mortgage does not lock you into fixed payments for years to come. You should only accept a loan that offers you the flexibility to make extra principal repayments as often as you wish. This will reduce your interest costs.

Set mortgage to interest only to reduce set payments

Paying interest only on your home loan gives you the freedom to decide how to spend the family budget. t you need some money one year for a bathroom renovation – you can spend the money in such a way. However the strategy should be that your obligatory set repayments are as small as possible and you apply every free dollar to reduction of principal as often as you can.

Make extra payments off the principal each month

If you consolidate your other debts into your mortgage, the outstanding loan increases. You can not afford to stay with minimum set repayments and take the full term of 25 or 30 years to repay your home loan. This is your maximum available loan term. If you wish to save money and not have the debt consolidation costs you more interest in the long run, then putting as much money as possible towards reducing the home loan principal is the strategy to follow.

 

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