Owning your own home is one of the most common ways to create wealth and live a comfortable lifestyle. Paying off your debt as quickly as you can afford means you'll own your home sooner and have money to do other things. Here are three strategies to help you pay off your debt faster.
Debt consolidation
This strategy is for people with a home loan and other personal debts, including a car loan, personal loan and/or credit cards.
How it works
Most personal debts are repaid at a higher interest rate than a home loan. By consolidating your credit card debt and personal loan(s) into your mortgage you can save money on interest and pay off your debts faster.
Example
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To use this strategy effectively make sure you repay your personal debts in the timeframe you originally planned. For example, a five year car loan that is consolidated into a home loan should be repaid within the five year period, instead of the 25 year home loan term. If you were to repay this extra debt over 25 years you'll end up paying more interest than if you had not consolidated your car loan into your mortgage.
Refinance
If you've had your home loan for at least two years, chances are your situation has changed since you got it. Your home loan should continue to suit your lifestyle, not the other way round. Indeed market conditions have changed during this time so there could be a better loan for you and you may be able to save money by refinancing your home loan.
How it works
With the many lenders available it's important that you look at your options before consolidating your debts and choose a loan and lender that suits you.
Once you've selected your new loan, your existing debt is refinanced into this new loan. Exit and/or penalty fees may apply but your Bernie Lewis mortgage adviser can show you whether you‟re financially better off by refinancing your existing loan.
It is commonly thought that switching loans is difficult and costly and so many borrowers don’t bother looking at their choices when in fact they should.
We currently have a great home loan on offer with a very attractive interest rate. So now is a good time to enquire about your home loan choices with Bernie Lewis. For more information on this attractive offer click here or enquire now.
Debt recycling
Many people wait until their home loan is repaid before starting to invest. Unfortunately this means they invest later in life, limiting the growth potential of their investments. Debt recycling lets you invest now and continue to pay-off your home loan reasonably quickly.
How it works
Debt recycling involves 3 key steps:
- Use your home equity as security for a separate investment loan.
- Use the investment income and any tax savings you receive from your investments (as well as your surplus cash flow) to help reduce your outstanding home loan balance.
- At the end of each year, re-borrow from your investment loan the amount you have paid off your home loan to purchase additional investments.
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Going Solar
Imagine being able to save many years and tens of thousands of dollars off your home loan and reduce your carbon footprint at the same time. In conjunction with ZEN Home Energy Systems, we've devised a simple and unique way for you to do this.
How it works
By using the equity in your home to install a ZEN Home Energy System, you can start earning money from your energy retailer for the "Blue Energy" you produce.
It is now cheaper to produce your own electricity than to buy it. By putting the money you save on your electricity bill into repaying your home loan your ZEN Home Energy System will not only pay for itself, but it will also help to pay off your home loan sooner. This strategy can save you thousands of dollars in interest.
To help you work out the savings you can achieve, Bernie Lewis and ZEN have developed the Solar Home Loan Calculator.
