Minimise mortgage stress.
Yes, we know rising interest rates are a sign of a strengthening economy. Yes, that’s some consolation for dishing out extra dollars every month. But no, it doesn’t make balancing the budget any easier. You can reduce both the amount and longevity of your mortgage. Here’s how:
- Increase the frequency of your repayments. Paying weekly or fortnightly greatly reduces your loan balance in most cases.
- Tipping lump sum payments into your loan (like tax returns, work bonuses, and gifts from rich, kind relatives if you’re lucky enough to have any) reduces the longevity of your loan.
- Aim to repay more than the amount required on a regular basis. The quicker you pay off your loan, the less you pay over the long term.
- Is your current loan the best one for you? Meet with your lender to discuss a better package, any special deals, and removing any features you don’t need. They don’t want to lose you and will make every effort to keep you, especially if you’re armed with competitors’ rates, fees and perks.
- If taking out a new loan or re-financing, while finding the cheapest rates and fees is important, so too is securing a flexible structure that allows extra regular or ad hoc repayments without penalty. Explore all fees, including any exit, establishment and hidden fees.
- Do you have incidental areas of sending that could be put to better use? Record your spending for one month and identify what you can minimise or do without. While small, regular splurges don’t seem to amount to much, they certainly do when calculating their cost over a year, or better still, over the life of your loan.