Techniques for saving home loan interest

"Not being in debt is a wonderful fortune" is a sentence that reinforces those who do not want to incur debt. But many people who need to create debt in order to achieve their goals, such as when married and have children want to have a home. Which is considered as a four-factor for living? However, in the past, Thai people did not like buying a house with cash. The suitable solution is to ask for housing loans from commercial banks.

A special feature of housing loans is that there are long installments for a maximum of 30 years. Therefore, before deciding to have a home with a loan, consider carefully. Because, after spending all the debt, it took more than half of life.

Before deciding to request a loan to buy a home, there are many issues to consider. One of them is chosen to buy a house that has a reasonable price and can afford it. Because in addition to the principal that must be paid in each installment Interest rates are an important thing to consider. In which commercial banks have two methods of calculating mortgage interest rates.

1 .Fixed interest rate

Fixed interest rate Is a fixed rate for a specified period most of them are in the first phase of the loan, such as the first 3 years with interest rates of 2%, etc.

2.Floating interest rates

It is the rate that changes according to the cost of each commercial bank. Which will refer to interest at MLR, which is the interest rate charged by large customers and have collateral? MOR is the interest rate charged by major large customers. Overdraft, MRR is the interest rate charged to fine retail customers. Therefore, if there is a chance the bank will announce a new interest rate to the borrower.

Because mortgage loans are a calculation of interest rates for principal and interest rates., therefore, if you pay each installment in an amount equal to at the same interest rate, you will find that most of the first payment is interest. Since the remaining principal amount is still high but when paying installments for a while interest will gradually decrease by decreasing the principal amount. Because commercial banks will use the money that the debtors pay in each installment to cut interest first, therefore, if the interest rate increases later, it may result in the interest paid in each installment increasing accordingly. And if the money paid in each installment is insufficient to cut the principal or to cut less, debtors must increase the number of installments per installment more or pay installments for longer.

Especially when long installments the more interest is lost, so if wanting to release the debt faster, then must find a way to reduce the interest burden. There are many methods such as:

1. Debt coverings

Repay each month more than the minimum stipulated by the commercial bank. For example, Mr. A. has left the house to pay 1,800,000 baht for a period of 20 years with 7% loan interest.

In the example, Mr. A must pay the house at 13,955 baht per month and throughout the 20-year contract, he must pay a total of 3,349,291 baht. Of this amount, interest is paid at 1,549,291 baht.

Suppose Mr. A wants to cover the debt by increasing the monthly installments from 13,955 baht to 14,955 baht (to pay 1,000 baht a month) will save interest 235,614 baht. And release the debt faster 2 years 7 months. Therefore, the higher the monthly installment, the faster the interest will be saved, and the debt can be released. This method is suitable for those who can share the money each month to cover the debt and still have enough money to spend.

2. To pay a lump sum

Debt clause 1 is an increase in monthly installments. But topping a lump sum is an onetime cap on a large amount of money. Next, installments are paid each month at the minimum rates set by commercial banks. For example, Mr. A brings 200,000 baht to reduce the loan amount. Resulting in a 1,600,000-baht loan balance (from previously 1,800,00 baht) causing 12,405-baht monthly installments and throughout the 20-year contract, a total of 2,977,147 baht must be paid. This amount is 1,377,147-baht interest paid.

Especially if the lump sum amount is used to cover the debt once a year, for example every January of every year Will make the loan amount decrease faster and can save the interest that must be paid as well. This method is suitable for those who have a large special income once a year, such as bonus money and then partially split to cover the debt before spending on other things.

3. Add more down payment

In this case, you must plan before requesting a loan, which is to pay as much down payment as possible. Because of the large down payment principal will be reduced. Therefore, it can save the interest that must be paid. However, before adding a down payment, you should consider whether you can manage other expenses perfectly or not.

4. Refinancing

Is a request for a new loan to pay off the same debt. Most often refinance since commercial banks began to charge floating interest rates. In order to get a lower interest rate but before refinancing, must see whether it is worth it or not. Because there will be expenses and fees that the commercial bank charges

5. Request to reduce interest

This method is to contact the branch requesting a loan and negotiate for a direct interest rate cut. By reason of use such as being a good customer have no history of late payment etc.

Requesting a loan in addition to having to thoroughly study the information before buying a house. After borrowing money, we must try to find a way to reduce the burden of loans and interest as much as possible. If possible, it will certainly release the debt faster.