No wonder the majority of home purchases rely on housing loans (mortgages). Unfortunately, not all prospective home buyers purchasing homes understand the mechanism of these instalments.
Once the bank has approved the loan agreement, most of the debtors only focus on efforts to meet obligations to repay home mortgage within the agreed time period. They are reluctant to look again at the rest of the loan and the amount of the interest rate. These are the typical mortgage debtors and they are much preferred by the banks.
However, there are clever ways to outsmart the mortgage debt that are not overly burdensome. The trick is to learn how the mechanism of the mortgage loan applies. Once mastered, it’s time to strategise in order to pay off the mortgage more quickly than the original plan.
One alternative is to consider how to reduce the principal amount of debt because the principal amount of the debt is the base of the imposition of interest rates. What is the path? The ability to save.
Saving can help reduce the burden of the principal debt. Typically, the bank always sets the amount of the instalment at a maximum of 30 percent of monthly income. The 70 percent residual income is considered to be needed by you for other living expenses. Try then to set aside from this amount savings of between 10-15 percent. Discipline is obligatory here.
Accumulated savings for a year and hopefully the added bonus of savings, capital could be used to reduce the burden of debt principal. In order to ensure that the balance of the savings quickly grows, it’s good to have the minimum amount of instalments selected. If unable to repay Rp 4 million per month, not everything is submitted to the bank. Better to use Rp 2 million for repayments and half for savings.
Imagine the accumulated balance of diligent saving annually Rp 2 million. Then there will be savings of Rp 24 million. Fairly useful to reduce the burden of the principal debt. When the principal debt becomes smaller, then the interest charged is also reduced. By itself, the allocation of funds for savings can be increased. If this strategy is constantly practised, then the debt period can be made shorter than the original plan.