My Property Investment Tip #29
How To Pay Your Loan Off FAST!
Method 2 of 7. Wash your wages through your mortgage.
So what does this mean? Well… pay your wages straight to your mortgage and then redraw only what you need as per your family budget, and only right before you need it.
This way all your spare cash sits against your mortgage, reducing how much you owe and how much interest you are charged.
What then happens is that the apportionment of your repayment between the Principal part and the Interest part, becomes less interest and more principal, and the spare cash you don’t use stays there, therefore paying the loan off faster.
Now there’s a few ways to do this, so speak to your bank about what options you have.
1. Have a redraw facility, where any EXTRA money you pay in can be withdrawn again (but of course the idea is to not take it all out. Just the bare minimum you need.
2. Have an offset account. My preferred method. An offset account is a savings account connected to your mortgage. Instead of earning interest, it reduces the interest charged on the associated mortgage. The balance of savings is subtracted from the balance of the loan before they charge interest.
3. Line of Credit. An LOC is a home loan that basically works the same as a credit card in that there’s a limit and you can draw it all out, but you must make regular payments to keep pushing it back down.
All 3 deliver the same effect.
Pay all your wages to your redraw, offset or LOC. Then do you your family budget and only withdraw that budget from mortgage leaving the rest there. Including all your over-time, allowances and extra money that comes in.
So that’s method 2 of 7. Stay tuned for the next 5!
– Daimo