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Having a house might be a dream for many people. However, it is hard to have a house because you can’t have it just by thinking about it. House is followed by house installment and debt. Of course everybody has different expenses and duties but who wants to be in debt for long? Today, ACU will share tips about how to pay off house debt that the bank never tells you.
You can start by checking how much income and expenses. You might do a record of income and expenses to see the source. Then, you can consider which is necessary and unnecessary for your spending. This way you can save more money for house installment and increase the cash flow.
After calculating and evaluating the spending, the increased money from reducing unnecessary expenses will be combined with the house installment money. Normally, there is a principal and interest, but mostly we only pay for the interest. Thus, paying over the set-up price will reduce the principal which will help you pay off your house quicker.
In the first 3 years, the bank usually has a low interest rate policy, which is a good chance for you to pay as much as you can in order to reduce the principal. Especially when you have an effective rate because you will not have to pay much interest in the future. However, you should add the house installment money little by little to not affect your financial status.
House installment mostly is in MRR which is adjustment for the higher interest rate. For example, in the first 3 years you have to pay 3%interest rate but 3 years later you have to pay 6.5% interest rate. This means you have to pay 2 times more than normal. There are 2 ways to do restructuring of a new house installment; refinance and retention.
Refinance: Move the debt to the new bank. The bank will offer a lower rate of interest which is a faster way to pay off the house.
Retention: This is suitable for people who have a good paying record. The bank will approve for retention easier than refinance.
