How to Pay Off Your House Loan 10 Years Earlier – Part 2
Now you have learned about the different types of housing loans, let’s explore how I helped Mrs June and her husband to come up with a plan on how to pay off their house loan 10 years earlier. This is Part 2 of the series.
If you have missed the first part, read it here first before continuing.
Let’s recap the key points from Part 1.
- Check your loan documents and see if it’s a semi-flexi or flexi loan.
- List down the following details:
i. Total outstanding loan amount
ii. Interest rate
iii. Monthly repayment
Here is an example from Mrs June loan document:
| Total outstanding loan amount | RM 457,909 |
| Interest rate | 3.05% |
| Monthly repayment | RM 1775.07 |
I then input these details into my Interest Optimisation Calculator:
From the results, Mrs June and her husband will fully settle their loan in 418 months or approx 34.8 years.
Next, we run through the Interest Optimisation Calculator :
So, how much do you need to pay extra to save an optimum amount?
We use this formula – 2x the interest amount (RM 1147.91 x 2 = RM 2295.82).
In the new calculation, instead of paying a monthly instalment of RM 1775.07, the couple pays twice the interest amount (RM 1147.91 x 2 = RM 2295.82).
By paying an additional RM 520.75/mth (RM 2295.82 – RM 1775.07), they could reduce their loan tenure from the initial 418 months (approx 34.8 years) to 278 months (approx 23 years), which is almost 12 years earlier. Not only that, they could save RM 104,969.93 in interest payments.
These are some of the techniques that I teach my clients and students in my Double Your Net worth (DYN) program which has helped them to save a lot in interest payments while paying off their housing loans earlier.
This strategy is not for everyone. You need to ensure you are having the right loan account. Would you like to know how to reduce your housing loan interest by 50%?