Anyone who wants to pay off their home quickly and be able to own a home ten years faster than before should consider the following techniques.
People who pay off their mortgage in the first few years probably won't notice much of a difference between principal and interest. Even after 3-4 years, you may have just noticed that the annuity paid every month has been deducted as interest several times more than the original amount. It leads to the question: Why was a smaller amount deducted from the loan principal? But instead, you have to pay more in interest when paying for a new home. In fact, there is an explanation for this.
I have been paying off my house for many years. Why did the capital decrease only slightly?
This case is not dramatic at all. You must first understand that Home loan campaigns offered by banks often include low-interest or fixed-interest promotions for the first 1-3 years to make payments more affordable for those who are just starting to make their mortgage payments. It is not much of a burden but after the promotion ends from year 4-5 onwards, the bank's home loan interest rate will be adjusted to change according to the interest rate at that time and hence, the installment paid every month will be calculated as interest instead of principal.
For example, if you normally pay 10,000 baht per month at an interest rate of 3% per annum, it will be deducted as interest of about 3,000 baht and the principal of about 7,000 baht. On the other hand, when the interest increases to 7% per annum, the interest portion will become 7,000 baht and the remaining portion of The original amount is 3000 baht
It can be seen that as interest rates on homes increase, the money paid in installments will be deducted as additional interest. Therefore, there is less capital remaining. Therefore, if we have a goal to close our home debt quickly, we should know 6 techniques that will help reduce the principal and reduce the interest on the house.
6 techniques to pay off your home quickly
Pay less interest
1. Payment in installments exceeding the monthly installment.
Many people do not know that the monthly installment amount calculated by the bank is just the minimum. But in reality, we can pay more in premiums than usual. Even a small amount such as 500-1000 baht or more can be done. Simply paying more than the minimum payments will help shorten the loan term and pay off your home debt faster.
The reason for this is that home loans charge interest rates based on a discounted principal and interest, which means that the more you pay in instalments, the more you pay. The additional funds will be deducted from the capital. As the principal decreases the number used to calculate the interest on the next installment will become lower and lower. If you do the math, you will find that paying once in installments each month can help you pay off your mortgage 10 years faster.
2. Pay more in installments during periods of low or stable interest rates.
Interest rates on home loans are usually the lowest during the first three years according to bank promotions. Therefore, the annuity paid will be written off as principal instead of interest. Therefore, you should use this opportunity to cover as much money as possible quickly. There's a lot, it's a lot. If there is little, cover as little as you can. In order to quickly reduce capital during a low interest period. This reduces the interest that must be paid in the following periods as well.
3. Get a lump sum of money to add up quickly.
Bonus at the beginning of the year Chinese New Year You get red envelopes In the middle of the year, additional income comes. do not wait! You should allocate an amount of money to cover the house as soon as you have the opportunity. You can cover it any time of the year. This amount will be deducted from the capital. Debts will be paid off quickly. The interest burden will be reduced.
The important thing is when you want to add extra money monthly or as a lump sum, don't forget to notify the bank that you want to make additional payments on your home debt to reduce the principal. Because if the bank does not know your intention, it will deduct the same amount as before.
4. Retention with the original bank
When the home payment is completed for 3 years until the end of the promotional period, it will enter into variable interest status. This writes off the annuity paid each month as interest instead of principal. One way to solve the problem is to negotiate a reduction in the interest rate on the loan with the original bank or retain (retain) to make the interest rate cheaper
This way, borrowers can easily contact and take necessary action. No need to waste time preparing all new documents. The approval period is quick if the debtor has a good history. Because the bank already has our information. Moreover, the fees are not expensive. Most of them are only about 1-2% of the loan amount.
5. Refinance with a new bank.
Refinancing is transferring home debt from the old bank to a new bank at lower interest rates. Because if you are still paying installments with the same bank that charges a variable interest rate we will have to pay more interest than in the first three years. But if you change to request a home loan from another bank that has a lower interest rate than it will be used to cover the original debt. Then go for installment payment with a new bank instead. You will continue to pay installments at low interest rates such asThe manager will decline faster. Save thousands of baht in interest monthly.
The borrower can request refinancing every 3 years or according to the contract concluded by the original bank. You must prepare all supporting documents to apply for a new loan each time you request refinancing. Including having to pay expenses and fees to apply for a loan. So, consider the comparison carefully. To choose the most feasible home refinance loan
6. Pay installments on time. Don't miss your payment.
It is important that you pay your mortgage on time with each installment. This is because if you miss a payment or make a late payment, default interest will be charged. This makes the total cost of purchasing this home increase even more. In the event of repeated defaults, you will also lose your balance. It also affects applying for loans or conducting financial transactions in the future.
Although a 'home' is an asset that must be paid in installments over a long period of time. But it is considered a debt for stability, which is useful and generates income in the future. So many people intend to pay off their home debt quickly. If you use these six techniques together it will help you reach your home ownership goal 10 years faster than before and will also help you save a significant amount of interest.
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