Posted by H.Shreuder on May 9th, 2010

Imagine being able to pay off your home loan in just 10 years. Well, it is possible and we will get to that in a few minutes but for the moment I want you to think about the obstacles that might be in your way before you can implement this strategy. Before we start, just make sure that you always have your home insurance policy up to date so that your most valuable possession is adequately protected.

Despite being under considerable pressure over the last year or so, many banks are still keen to throw credit cards at you left, right and centre. If you have a good employment history and are earning enough money, you’ll easily qualify for any number of credit cards and before you know it your wallet could be bulging with ready to use credit.

The problem is, if you can’t curb your spendthrift ways you’ll end up owing more than you ever thought possible, and your home loan will be placed on the backburner for the entire duration of its 30 year term.

The sceptics among you might think that banks are doing this to keep you from ever paying off your home loan, and you might be right; but whichever way you look at it, the only way you can bring your finances under control is to curb your spending and live within a strict budget.

To some people the word budget is like a bucket of cold water in the face. It’s refreshing and it wakes you up, but at the same time it’s a little bit unpleasant and certainly not what you want. But after all is said and done, if you don’t have a budget you will never pay off your home loan quicker.

And that’s that.

So, with that sobering thought, exactly how is it possible to pay off a home loan in 10 years? Well, it’s quite easy. All you have to do is make extra monthly payments, or least make repayments more regularly.

This strategy might be a bit of a letdown, but let’s look at some figures.

Say you have a $300,000 home loan over 30 years with an interest rate of 6.5%. The minimum monthly repayment the bank will require is the $1,885.99. If you want to pay the loan off in 10 years, the monthly repayment needs to increase to $3,388.09. If you have the income to do this then good for you!

For most people however, the best approach is to sit down and set a strict budget. You need to be really ruthless and decide the minimum monthly expenditure you can live with and then throw all your excess cash into your home loan. If you can free up just $100 per month, then using the same example above you will reduce the loan term by four years!

As time goes by, your wages will inevitably increase and if you keep a strict budget in place it might not be too long before you can increase the repayments even more substantially.

Who knows, if you can eventually make repayments of around $3,500 a month, your loan will be paid off in 10 years.

2 Comments to “Is it Possible To Pay off Your Home Loan in 10 years?”

1. on 23 May 2010 at 7:52 pm1Kalpesh Mutha

   Yes - it is very-much possible to repay your Home Loan in 10 years. Social Systems has bigger role in this!

   In India, social system plays a big role in expediting the loan repayments. Loans taken by relatives, neighbours and friend, although termed as private affairs, but discussed socially and advised to reduce and not to add further liability.

   People are also keen to reduce the liability and “adjust” to the low standard of living for some period - may be it is 10 years - but freeing next 20 years’ botheration.

   Loan repayments are celebrated in family gatherings and common dinners, and by buying jewelleries for ladies in the family.

   Generally, Home loans are taken by age group 28 to 45 years - when children in the family are studying. Also, in India - ancestral loans are treated as repayable by children, and not referred to the liquidators. No father would like to leave loan liability to his children. If any mishap happens to their life and if the loan continues - especially at the time when children are about to start their earnings - they will not be bold enough for whole of their life with the liability.

   You may say that Insurance cover may reduce this risk. But with the Insurance companies insisting on one-time insurance payment - which amounts to around 2.5% of the property value for 25 years - depending upon many criteria, the India public is not ready to open their mind for paying hefty sum to the insurance companies. So the social system remains in-tact.

   These and other - many social factors ensures the loan repayment is expedited.

2. on 05 Aug 2010 at 4:57 pm2Natasha Ellis

   Had i known back then what i know now, i would have most definitely paid my mortgage off in that time frame. I believe that if you set yourself a timeframe and a budget, and if you are prepared to stick to that budget, it is highly possible.
   There are huge amounts of money saving techniques now available that allow you to save where you never thought possible, you just have to look! My favourite, especially in my stage of life (50+), is yourshare.com.au that eliminates the payment of hidden trailing fees and commissions that i would be paying as financial advisory fees on my super and mortgage (even though i haven’t spoken to a financial advisor for at least 10 years). If you are willing to research you will be amazed at what you will find, that many wont tell you about.