Techniques for paying off your house quickly

How to #PayOffYourHomeFast

Although these two methods of paying off your home loan quickly involve paying down the same amount of money, they yield different results. Let's compare these two methods to see how each affects your home loan payment.

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Option 1: Overpayment every installment

Home loan with a loan amount of 3,500,000 baht. In the first year (installments 1-12), the installments are 10,500 baht per installment. Then, in the second year (installments 13-24), the overpayment is increased by 3,000 baht per installment, resulting in a total of 13,500 baht per installment. The total overpayment for the second year (installments 13-24), totaling 12 installments, is 36,000 baht. During these two years, the interest rate is fixed at 3% per annum. This shows the loan repayment for Option 1.

#Loan repayments are made normally in the first year, and overpayments begin in the second year, starting from installments 13 to 24. The per-installment payment is increased from 10,500 baht per installment to 13,500 baht per installment. The total overpayment for the second year is equal to 36,000 baht. The total installment payment from the first year to the end of the second year is 288,000 baht.

Of this amount, 205,335.19 baht is used to pay interest and 82,664.80 baht is deducted from the principal. At the end of the second year, or the 24th installment, the remaining debt is 3,417,335.20 baht. This is followed by overpayments of the same amount, continuing into the 20th year (up to the 240th installment).

When the loan is repaid continuously up to the 240th installment, the overpayment remains constant. At the end of year 20, or installment 240, the total repayment amount will be 3,204,000 baht. Of this amount, 1,676,353.12 baht will be used to pay interest and 1,527,646.86 baht will be used to pay principal. The remaining debt at installment 24 is 1,972,353.14 baht.

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Option 2: Add additional #home payments annually.

The home loan amount is equal to Option 1, which is 3,500,000 baht. The first year (installments 1-12) is paid at 10,500 baht per installment. In the second year, installments 13-23 (totaling 11 installments) remain the same at 10,500 baht per installment.

However, the final installment of the second year (installment 24) is paid an additional 36,000 baht (equal to the total overpayment amount in Option 1).

The total payment for the 24th installment is 46,500 baht. During these two years, the interest rate is set at 3% per annum, the same as in Option 1. The loan repayment is shown according to Option 2.

The loan is repaid normally in Year 1 and Year 2, from installments 13-23. The only overpayment is the final installment of Year 2 (installment 24).

The overpayment is made. 36,000 baht, resulting in the 24th installment payment of 46,500 baht. The total installment payment from the first year to the end of the second year is 288,000 baht.

Of this amount, 205,827.44 baht is used to pay interest and 82,172.57 baht is deducted from the principal. At the end of the second year, or the 24th installment, the remaining debt is 3,417,827.43 baht.

And when installments continue into the 20th year (up to installment 240), the same overpayment amount is applied to each final installment of each year.

When the loan installments continue to the 240th installment, the overpayment is applied in a fixed amount only at the final installment of each year. (Pink highlighted bar) At the end of year 20, or installment 240, the total repayment amount will be 3,204,000 baht.

Of this amount, 1,688,716.20 baht will be used to pay interest and 1,515,283.86 baht will be used to pay principal. This leaves a remaining debt balance at installment 24 of 1,984,716.14 baht.

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Who is this suitable for paying off your mortgage quickly by paying off your mortgage in installments is suitable for those with relatively stable incomes and expenses. This allows for accurate financial planning. Therefore, setting aside a portion of the money to pay off the excess each installment is less risky. This is a better way to pay off your mortgage than waiting for a single, large lump sum, such as a bonus, which only comes a few times a year, to pay off the debt.

Paying off your mortgage in large installments is suitable for those with unstable or irregular incomes, such as salespeople or freelancers who receive wages or commissions. Once a project or sale is closed, it may not be possible to overpay every installment.

However, both methods suggest that you should overpay your mortgage every opportunity, whether it's making small, frequent overpayments or making larger, infrequent payments. Both methods can directly and effectively reduce your debt.

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Source: DD Property: https://bit.ly/3MoVGrY