Would you like to know how you can save up to eight years on your home loan?
We want to take you through how you might actually be able to save up to eight years on your home loan and how you can set up your accounts to make that automatic and really easy to do so.
Step one – Completing a budget
Head to moneysmart.gov.au and complete a budget. Be as detailed as possible, having your bank statements handy will help you to see exactly where you are spending your money. Once this is completed, go over your budget and look for any potential for savings or categories that you can cut back on i.e. food delivery services or those 8 streaming subscriptions you have. In the summary section you will see what your potential savings will be.
Step two – Determining how much can go towards extra mortgage repayments
Jump on our website mynewbridge.com.au and click on the extra mortgage repayments calculator link under the calculators tab. Put in your loan amount and the amount you can save each week (or month) and see what sort of effect that will have on owning your own home sooner. For example, based on a $400,000 loan at 4% per annum over 30 years, paying an extra $85 a week will save you over $85,000 in interest and you would own your home eight years ahead of time.
Step three – Set up separate bank accounts and automatic transfers
Divide and conquer by creating separate accounts. For example, account one for your wages/salary, account two for all your direct debits and bills, account three for your everyday spending. This includes all the things that you would use your card for on a daily basis and will be what you will be living off every week from now on. Make sure you link your debit or ATM card to this account.
Once you have a clear idea of what your weekly living expenses are, simply set up an automatic transfer from your income account to your everyday expenses account.
From there you can set up any further accounts for other savings goals, such as your children’s education, or holidays you have planned, and then work out what the allowance is for those items and then what is the weekly amount that needs to be transferred? We want these savings accounts to build up over time and to do so automatically without having to keep on it every month. Once you’ve done that, go back to what that extra amount you can contribute towards your home loan based on the budget you completed in step one. Set this up as an automatic and recurring weekly payment straight into your home loan in addition to your current minimum repayment. This is easily done through your internet banking and once completed you don’t have to think about it.
Now that you are all set up, you’ll be able to own your home a lot sooner than if you just do nothing. The effect it could have on your lifestyle and your retirement and the options that you have could be enormous.
