Three strategies to pay off your home loan faster in Thai baht

The topic of mortgage payments has been making waves on social media recently, following a Facebook user sharing their experience of repaying a home loan with a bank. The user was required to pay 10,900 baht, but after deducting the principal amount, only 5.50 baht was left, the remainder being interest.

Today, we want to share three easy, effective strategies to help you pay off your home loan faster and avoid exorbitant interest rates.

The first method involves making payments on time. This not only helps reduce the loan amount as it should but also preserves your credit rating, putting you in good standing as a debtor. This can potentially lead to negotiations with financial institutions.

Late payments, on the other hand, can slow down the reduction of your home loan balance, leading to increased interest payments. You may be penalised with higher-than-normal interest rates for missed payment deadlines.

The second method involves restructuring your home loan to reduce interest. This can be done in two ways.

1. Refinance: Ideally, refinancing should occur every three years. Most banks offer special low-interest rates for the first three years of repayment. From the fourth year onwards, interest rates usually increase and become variable. Refinancing can help you enjoy lower interest rates once again. However, it may be time-consuming to prepare documents for a new loan application and to wait for the financial institution’s decision. Other costs may include fees for the new home loan application, property appraisal fees, new mortgage registration fees and stamp duty.

2. Retention: This involves requesting a reduction in interest rates from your current financial institution (creditor). The benefit is that you don’t need to change your creditor, simply request a reduction in interest rates. The advantage is that there are no fees for applying for a home loan, and the processing time is shorter because the bank already has your repayment history. The downside is that the interest rate may not be as attractive as refinancing.

The third method to pay off your home loan involves overpayment or paying more than the set instalment. This can quickly reduce your loan balance, subsequently reducing the interest you have to pay later. You can overpay at any time when it is convenient and within your financial capacity. Especially when a bonus is issued and you want to pay off the house entirely, this method works well. However, good financial planning is crucial, otherwise, future problems may arise, reported KhaoSod.

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