A home loan is likely to be the largest and most prolonged debt most people will incur in their lifetime. That means we each need to have a sustainable strategy in place for dealing with this debt. Find out how to pay off your home loan quicker:

Choose a Shorter Bond Duration

When taking out a bond on your dream home, most people think about what’s the largest figure they can get. The question you should be asking yourself is how to pay off the debt fast. That means taking out a bond that you can afford to pay off over 5 or 10 years instead of 15 to 20. The shorter the bond duration, the lower the amount of interest you’ll end up paying. So, if you’re pre-qualified for a bond of R2,000,000.00 for example, think about opting for R1.8 million or even R1.5 million instead.

Choosing a shorter bond duration or a smaller cash amount will make paying your home loan quicker substantially easier.

Pay More Than the Required Amount

If you’ve committed to a specific payment amount each month on your home loan, that doesn’t mean you can’t pay more. Due to the cumulative nature of interest and the extended duration of home loans, paying even a little extra each month can shave years off your home loan. Take for example a R1.2 million loan at an interest rate of 7% over a 20 year period. Without paying any deposit, the monthly repayment is R9,303.00. Paying an extra R1000.00 per month will reduce the remaining loan term to 16 years and 4 months. That’s a total saving of R217,903.00 and a reduction of loan term by 3 years and 8 months.

Carefully Evaluate Your Luxury Spending

Examine your monthly budget. Your monthly budget should detail how much you’re spending on necessities like food, utilities, retirement annuity, and so forth. However, it should also detail how much disposable income you’re spending on things that you don’t need. Alcohol and tobacco are great examples of luxury spends that can easily be cut down to free up capital to put into your bond. For example, the average cost of a box of cigarettes in South Africa is R37.09. That means a pack-a-day smoker will fork out R1,112.67 per month, or R13,537.45 over the span of a year.

Reducing unnecessary luxury expenses can shorten home loan repayment periods by years. That’s not an exaggeration!

Put Bonuses & Pay Raises Into Your Bond

If you’re in line for a promotion, or on the prowl for a better paying job – consider putting that extra cash towards your loan repayments. Think about it this way: if you’re currently able to dedicate 25% of your income towards loan repayments then as soon as your monthly income increases, continue to put 25% of your income towards the debt. This means you can still enjoy an increase in disposable income and enjoy a better lifestyle while paying off the home loan faster.