Home Loans: Mortgage Tips
After eliminating your Short Term debt, slightly increasing your monthly bond repayment and paying one or two lump sums into your home loan account you will already be well on your way to cutting your total bond repayments by thousands and paying it off sooner.
The next step to complete Mortgage Management is to maintain your current monthly repayment amount even while interest rates are dropping.
Step 4: Don’t lower your home loan repayments when interest rates drop
Currently only about 5% of all South Africans have fixed rates on their home loans, which means most of us are exposed to the movements of the prime interest rate. Homeowners feel the pinched when rates are increasing and often well and periods in which the rates are dropping.
But since you’ve become accustomed to paying your regular monthly bond amount, it’s best to continue to pay this amount even when rates drop. In this way your monthly disposable income remains the same and you’re paying for more of the capital which reduces the effect of interest accumulation in your mortgage account.
By doing this you will be accelerating your payments and save more, without impacting your current budget. You save on total interest and shorten the length of the bond.
In previous articles we explained the first two steps to reducing for mortgage debt
Step 1: Eliminate Short Term Debt
Step 2: Increase you monthly repayments slightly
Step 3: Pay lump sums and bonuses into your bond
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