For most people, the title of this article will look completely ridiculous – most people want a smaller bond installment, not a bigger one. I am not advocating going out there and buying a more expensive home or even paying a higher interest rate though, I am talking about increasing your voluntary contribution overall. The sooner you can get the capital of the loan to start coming down, the less interest you will be liable for overall.
Start by never getting a mortgage that eats up all your disposable income. That way, you can always start from day one to pay in extra money. It is also important to make sure that you keep your credit record clean, especially if you have an adjustable rate mortgage.
Ever wonder why some of your friends seem to get such great deals on their cars, etc. and that, when you take up the same car, you have to pay more? Their credit score is probably better. And it is not just at the beginning of the contract, the bank may increase your rate due to a weakening credit score. Talk about kicking you when you are down. Read more about mortgage calculator Lacve.com here.
If, however, you pay more than the minimum monthly payment, they have no reason to revisit your credit score. You should be doing that on all credit accounts anyway. The best use for a credit card, for example, is to use it interest free and pay off the full outstanding balance every month. Essentially then the credit card company is subsidizing your lifestyle and you get off without paying any extra in the form of interest – what they bank on though is that you won’t pay it all back.
And that is when they nail you for interest on the full amount. This can add up very quickly so rather keep the card for emergency use and not for every other little thing out there. The same with the mortgage – do not touch the funds in there unless you have to – that new stereo can wait – and your bond will soon come down.
What you do need to find out is how your bank views additional payments – sometimes they are only credited every six months and so the interest savings are minimized. Also ensure that you can get the money out should you need it and you have a great place to put away some emergency cash.