If you are looking to finance a house and purchase land with a loan, your lender
may introduce to you a feature called “extra repayments”. This common home loan
feature allows you to pay more than the monthly premium so you can pay your
loan off quicker. The question is, are extra repayments worth the risk of
having less cash every month?
Not that cut-and-dry
The general consensus would be “yes”, but there are certain situations
in which entering into an extra repayments agreement could be detrimental. You first
need to make sure you have enough money to take care of your bills and
expenses, not to mention something to put away for savings. Once you’re sure
these can be taken care of, only then should you consider your loan’s extra
repayments feature.
Benefits of extra repayments
Extra repayments take advantage of the power of compound interest to
help you own your home faster. In addition, putting more money into your home
loan doesn’t incur taxes, and it’s very useful for improving your net worth and
financial health. Indeed, extra repayments are a good idea—that is, if you can
afford them. Talk to a financial advisor on how you can maximise this option
for your needs.
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