Is it worth pay­ing off the loan faster?

Paying down loans or other financial obligations at a faster rate than required often results in significant long-term savings. A good way to reduce interest costs is to make additional payments toward the loan principal whenever possible.

Annual interest charged on the loan is calculated based on the remaining principal balance. This amount decreases each time the principal is reduced. Even if you only put relatively small additional amounts toward the principal, it quickly adds up and often makes a substantial difference in the total amount paid by the time the loan is fully repaid. The old saying applies here: Many small things make one big thing.

The simplest way to make additional payments on your loan is to use your supplementary pension savings. You can apply to use such savings tax-free to pay down the principal of housing loans. Individuals can pay up to 500 thousand krónur per year toward their loan from supplementary pension savings, and couples or cohabitants can pay up to 750 thousand krónur.

Of course, it's impossible to predict the total savings when following the above advice. However, when all is said and done, the savings are likely to be considerable.

It's worth noting that it's not necessarily wise to put all your savings toward your loan. It's good to have an emergency fund for unexpected circumstances, such as sudden job loss or illness.