Question about paying off home loan faster.

Discussion in 'Go ahead!...ask us anything!' started by The Charlatan, Aug 31, 2017.

  1. The Charlatan

    The Charlatan First Grade

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    As I understand it, interest is calculated daily and then charged at the end of the month.

    If I was to pay an extra amount every week, say $70 on top of my repayment, does it chip away faster at the loan if you pay $10 a day, or just $70 per week as you get paid, (assuming a weekly pay cycle?)

    I currently am making repayments on a daily basis.

    Any advice is appreciated.
     
  2. Vic Mackey

    Vic Mackey Coach

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    Are you P&I or Interest Only?

    Fixed or Variable?

    There's not a huge difference mate, like I mean not even a cup of coffee a month. I'd just do the $70 in one hit. An extra $3,640pa will start to eat away at the interest.
     
  3. Last Week

    Last Week Juniors

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    Have a look at this mortgage calculator.

    https://m.drcalculator.com/mortgage/

    It's the best one I've found online and gives really comprehensive information on your loan.

    Extra repayments always help, that's why we'll be paying our mortgage fortnightly. (we're building) Essentially making 13 months as opposed to 12 if it were monthly. Weekly repayments I think are near the same as fortnightly.

    Talk to a broker. Your $140 a fortnight might be put to better use in an offset account.
     
  4. The Charlatan

    The Charlatan First Grade

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    P&I, variable.

    Not sure whether doing $10 a day is the same as dropping $70 on payday. Would have though since interest calculates daily the earlier you put the whole extra repayment amount on at once. Wife is going back to work shortly with a view of putting her salary on the house, will it make a difference with a larger amount?
     
  5. The Charlatan

    The Charlatan First Grade

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    My mate used to be a broker, he said it was offset or faster repayment was more or less the same difference. He said to basically just put as much as we could into the repayments or an offset account.
     
  6. Last Week

    Last Week Juniors

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    In that case, the only advantage I can see in the offset is that you can drawing on that money if you need it. Which I think is a good option to have.

    In the early years of your loan, you're paying f**k all of your principal. It's mostly interest. An offset would help keep those costs down or, likely, you'd be paying off your principal quicker.
     
  7. sensesmaybenumbed

    sensesmaybenumbed Moderator Staff Member

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    We had an offset account.

    Had.

    And that's a compliment. They are awesome.
    Just be disciplined with it within reason.
     
  8. The Charlatan

    The Charlatan First Grade

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    As I understood it, you paid higher interest on your offset, basically with my bank the cash rate is applied to the home loan rate. That's how they get you.
     
  9. sensesmaybenumbed

    sensesmaybenumbed Moderator Staff Member

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    That wasn't the case for me. Fine print...
     
  10. The Charlatan

    The Charlatan First Grade

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    Ah OK, My current interest rate is 3.82%, but if I went to interest offset, the rate jumps up by 1.5%, incidentally the cash interest rate at the moment.
     
  11. ___

    ___ Juniors

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    I have an interest-saver off set. That means the interest I'm charged is based on what's in the offset. So if I have a $500,000 loan, but $100,000 in the offset, the interest charged is based on a $400,000 loan, not $500,000.
     
  12. Vic Mackey

    Vic Mackey Coach

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    3.82% is a real good rate atm. Who are you with?
     
  13. The Charlatan

    The Charlatan First Grade

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    f**k it... Double.
     
  14. The Charlatan

    The Charlatan First Grade

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    St. George.

    They're merkins, once we've paid it off I'm discharging the mortgage and going through another lender to finance our knockdown & rebuild. Nearly f**ked our finance on our first home that we built and bullshitted us and stung us with this home. Needed bridging finance between our purchase and sale though so we just stayed with them as it was easier.
     
  15. sensesmaybenumbed

    sensesmaybenumbed Moderator Staff Member

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    Make sure you turn the knife. You never know, a better deal might be offered.
     
  16. Vic Mackey

    Vic Mackey Coach

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    You can change anytime mate. Go see a broker. I've always found mortgage choice great to deal with.
     
  17. sensesmaybenumbed

    sensesmaybenumbed Moderator Staff Member

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    Mortgage choice for us, a great deal too
     
    Last edited: Sep 12, 2017
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  18. Eion

    Eion Bench

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    I've always thought the shop around thing is dangerous. No one ever talks about the length of a loan.

    With many of us stretched and paying close to minimum, there's a pretty good chance we run close to the full life of the loan.

    If you have an interest and principal loan of say $400k for 25 years, you basically end up paying $800k over the life of the loan. But the lender loads the interest in the first half of the loan cycle, which is why you don't see your loan decrease for years.

    So, just say you go with another lender after 10 years, you would have paid shitloads of interest over those 10 years to your old lender, but made no real inroads into your mortgage and most people restart their mortgage clock back to 25 years when they refinance.

    When I've looked into it, I've asked to compare repayments based on the end date of my current mortgage,and it's not been worth it, not even close.

    Anyway...I'm probably rambling and don't even know if I'm making sense,after a couple beers.
     
  19. The Charlatan

    The Charlatan First Grade

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    On a good rate and we're hoping to have it paid off in less than five years. Not going to f**k around now. Would rather f**k them out of their interest first and then walk out.

    A means to an end, just as we were for them.
     
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