Thursday, 20 December 2012

Mortgage repayment tips - part 4

This is the fourth of a five part series on mortgage repayment tips.  Today’s topic is “Make extra repayments.”

Making extra payments is the most challenging of the mortgage repayment tips because it requires sacrifice.  However, I try to remind myself that a small sacrifice now can have a big impact over the life of a loan due to the impact of compounding interest.

It’s helpful to use an online calculator and estimate the value of a one-off additional $100 payment now over the remaining term of the loan – e.g., at 5.15% over 20 years, that $100 will save you $180 in interest; at 6.15%, the savings will be $242.  If you do this regularly when contemplating a new purchase, you might find that you can sway yourself away from making non-essential purchases.