Hi all
I am trying to work out whether it works out better paying my insurance premium 1 year up front or paying monthly. I know it is better to pay monthly but in this case they will charge me 7% extra.
Basically it is either $397 a year or $35 per month
I’ve based my calculations on a $50,000 loan and it worked out that it is better to pay up front. Is this possible? :S
I also took into consideration that I will be making $1500 in extra repayments each month (20 year term).
Hope someone can help me
I am confused – why have you based it on a $50k loan when it is only $387.
7% more is not too much, you will be saving interest by keeping your money in your account longer too. It you have an offset account you could be saving more like 8.7% pa each month plus interest saved on the home loan is pretax money too.
Then there is the opportunity cost – if you had more money available you would be able to invest more and maybe make an even higher return.
But remember it is just a few hundred dollars too – so we are only talking a few dollars saved each year!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I know it's a small amount and my loan isnt that big, but every dollar counts
Thanks for that. It makes so much sense, I will opt for the monthly payment option since my home loan is on 9.4% at the moment
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