Example: Elizabeth's extra repayments
Elizabeth has paid $150,000 towards the principal of her $650,000 home loan with a 5.50% p.a. rate and she still has 20 years of the original 30 years to go before she can truly call her home her own. With a steady source of income, making additional payments isn't much of a problem and luckily, the home loan she has allows her to make extra repayments without imposing any penalties.
Using the calculator, she works out that by increasing her monthly payment from $2,271.16 to $ 2,371.16 – an increase of $100 – she can reduce the loan term by 17 months and save around $18,000 in interest.
She doesn't stop there, though. She figures that rounding off her monthly payment is just as affordable and that's exactly what she does. She now makes a monthly payment of $2,400, which is $128.84 more than her regular payment. She will now save 22 months off her loan term and more than $22,000 in interest.
* This is a fictional, but realistic, example.
