How Budget Apps Can Help You Pay Off Your Mortgage Faster
The decision to pay off your home loan early is a controversial one. But for some who have tackled many of their big financial goals and erased other debt, putting their home loan in their crosshairs can make sense.
Since your home loan is such a large, long-term debt, it is a little difficult to handle without keeping track of all your payments and expenses.
That's why an app is a good idea, not only to help you save money by cutting unnecessary expenses, but to also help you reduce your debts, including home loans.
Here's how to get started.
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Take a look at your financial plan
Before you start panicking and thinking about a refinance option for your home loan, take a closer look at your financial plan.
See the number of investments you have and the returns they are yielding. If you feel comfortable with what you're getting in return, you can just as easily redirect the surplus you have towards the prepayment of your home loan.
Create a budget
Monitoring your spending can help you keep up with your loan repayments. How do you do this?
Personal financing apps let you do this very easily. Start with a small amount and every time you have raises or bonuses from your job or you save some money, put it toward that account.
The goal is to put the same percentage of your income toward your loan, even when your pay goes up. So if you’re currently putting 20 percent of your income towards your loan payment, 20 percent of each annual raise amount should also go towards your loan, in addition to what you’re already paying.
If you’re already leading a comfortable lifestyle you can put your whole raise amount towards your loan account.
Set a goal
A budget will help you to set a goal, you can work towards. Whether you are trying to pay off your loan faster, save for a big bill that is coming up or builds up your savings for a rainy day, here are some goal-setting rules to follow:
Be specific - You're more likely to achieve your goal if you work out exactly what you want and why
Be realistic - Don't make your budget so tight you won't be able to stick to it - look at cutting down on extras while still allowing an occasional treat
Stay motivated - Set yourself a time frame to accomplish your goal and, if you need to, break your goal down into smaller chunks to make it easier to achieve.
Set a target payoff date
In the end set a target payoff date, which will allow you to know exactly how much extra to pay each month to be loan-free by a certain date. You’ll have the added motivation of marking your calendar to plan the celebration.
Budget apps allow you to develop your financial game plan and if you stick with it, you are in for a home run.
Krist Duro is Consigliere at MoneyCoach, a personal finance app designed for both individuals and startups.