Take control of your cash flow to reduce mortgage debt
If you are lucky enough to be currently spending less than you earn, you may want to use your surplus cash flow to accelerate the repayments of your home loan.
What are these benefits?
* Saving on compounding interest, and
* Create great equity in your family home that could be re-borrowed for future investment purposes.
How Does This Strategy Work?
The interest on many home loans is calculated on the outstanding daily balance,even though it may be charged against the loan less frequently.
You can therefore reduce the average daily loan balance (and save considerable amount of interest) by:
1. Increasing the repayment frequency
(e.g. from the monthly to fortnightly). This can reduce your average daily loan balance even though the level of repayments are the same each year.
2. Increasing Your Regular Repayments
This involves using your surplus cashflow to pay off your home loan sooner.
3. Crediting Your Salary
Automatically into your home loan or a 100% off-set account (if available). By doing this:
*Your salary hits your loan account sooner, having the same effect as increasing the repayments frequency.
*Your salary is immediately used to reduce the size of the loan, having the same impact as increasing your regular repayments.
*You may achieve a higher after-tax return on your money when compared to directing salary into a cash account.
*You can access your money (either from a 100% off-set account or using the loan’s redraw facility) to meet your living expenses during the month.
4. Paying the Majority of your living expenses with a credit card.
Provided the credit card is repaid within the interest free period, this strategy enables you to use the credit card providers money to fund your living expenses,while applying your own funds to reduce your average daily loan balance. This type of option requires strict personal management as one does not want to over spend more than what is earned.
Australian Mortgage Centre
http://www.aussiemortgagecentre.com.au
Michael writes for the Australian Mortgage Centre where visitors can apply online for all types of residential, investment and first home buyers loans. AMC specialise in commercial loans, bad credit loans, private finance, Lo-doc & No-Doc loans and leasing, motor & equipment finance, caveat finance, short term funding and debt consolidation finance. Article Source:http://www.articlesbase.com/debt-consolidation-articles/take-control-of-your-cash-flow-to-reduce-mortgage-debt-934076.html
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