How much of your home loan are you actually paying off? The home loan balance seems to move at a glacial pace at the start. You can get control and gain some traction, surprisingly with what might seem like little effort. Once you grasp how a table home loan works.
| Balance | Total repayment (monthly) | Interest portion | Rate | Principle portion | Balance | |
| 1st payment | $800,000 | $4,542 | $876 | 5.50% | $3,667 | $799,124 |
| Half way | $557,903 | $4,542 | $1,985 | 5.50% | $2,557 | $555,918 |
| At the end | $9,023 | $4,542 | $4,501 | 5.50% | $41 | $4,522 |
The amount which goes towards interest vs principle changes while the total repayment stays the same, on a table home loan(if interest rate stayed the same). As illustrated in the table above, the portion going towards paying off your home loan gets nicer after the half way point of the total term.
You can accelerate the term and save a lot of interest by short circuiting the above with additional repayments. Any extra repayment you make will come straight off the loan balance and will reduce the next interest payment. This will will mean you will have more cashflow available for the next repayment. This snowball effect is why the results seem so amazing with a little more repayment.
Of course life can throw surprises at you from time to time. With lending rules the way they are banks might not have many options to help when you are stuck in a tight spot, even if you have paid your home loan down quicker. This is why its important to keep control of the limits by using a flexible facility. That is why home loan advisers tend to approach term reductions by chopping the home loan into small bite size chunks. Small flexible bits that can be looked after without losing access to the additional repayments you made.
