Today marks exactly 14 installments on my home loan payments. A little over a year ago now, I made the most importance decision of my life by taking on the second debt . The first I took out was to enable me to pay a rental deposit ( N$2000) in my first year of working and the second debt is taking out the home loan.
Since then, I have been on a personal journey to learn about financial freedom and how to achieve that and the most common hinderance to this is debt for many. Many people take out debt they cannot afford but are at least able to service them and hence are trapped in this cycle of debt for a long period of time. Knowing this, I set a person goal, which was to pay off my home loan in under 51 months.
I have written various articles on home loans and mistakes I made in this journey so if you stroll around my blog you will find tons of information on this. In the interest on transparency, my house costed N$479 000. This is cheaper than an average property especially in an urban area due to the fact that I bought it directly from the municipality.
I was determined to shed off this debt very quickly such that I have been putting in extra money in the home loan ranging from a committed monthly installment over and above the normal installment, travel allowance money and any other lumpsum in the mean time. I kept a rough amortization schedule to track my progress in addition to viewing the balance on a monthly basis.
Today as I made the top payment, I was actually surprised to see that I have now brought down this debt to under N$300 000.This to me is a key milestone on this journey, it brought renewed optimism and also assisted to realized that where there is a will, there is a way.
Here is a few things that I have learn along a the way:
- I gave myself a boost by covering my own lawyers fees. This is a N$19 000 that would have been added on my bond should I have not covered it cash and incur interest of prime plus one over the life time of the loan.
- Debt is manageable if you take a level you can comfortably pay off within the reasonable period.
- Having a budget definitely makes it easier to put in the extra money as when your income comes in, you will know what portion is reserved for that.
- Learn to appreciate what you have so that you do not envy what others have. Since I moved in, I have not made any major improvements other than buying a fridge and a washing machine when my cousin moved out.
- I was initially given a high interest rate of prime plus one because I was new to the bank I got the loan with, no credit history with them or my previous banking which I was unhappy about. Now with the drop in repo rate, I am excited with the savings as my rate dropped to 9%.
If I had not committed to this journey, I would have owed the bank a whooping N$471 388. 44 on the 14th installment , which would have been only an N$8 236 reduction in the original loan amount.
Cheers to this and many more on this journey! If you are contemplating undertaking on this journey it is indeed doable. The aim is to get the debt to just below the N$200 000 in the next episode of this journey.
Until then, stay safe