HOMELOANS
BY
Accelerated Repayment Mortgages
You
can accelerate the repayment of your mortgage by working out the maximum
regular amount you can afford to pay for the mortgage (being an amount
greater than the payment required by the lender) and then making a
commitment to yourself to pay this amount on an ongoing basis.
EXAMPLE:
A
mortgage for $120,000 at an interest rate of 6% over a term of 25 years
would require "equal payments" of $773 per month. If the
borrower can afford to make regular monthly payments of $860 (ie, $20 more
a week) then the total interest cost over the term, assuming no interest
rate change, would be $86,400.
This is a saving of over $25,000 compared to equal payment mortgage
cost of $112,000 and would reduce the mortgage term by five years!
BENEFITS:
•
Lowest interest cost and shortest term of any amortising
mortgage type.
•
Can always reduce amount of payment back to the lender required
minimum.
•
Can reduce payment amount to even below the original required
minimum amount or have a payment holiday by restructuring loan over
balance of term.
DISADVANTAGES:
•
Requires discipline to maintain voluntary higher payments.