This year, continued rises in food prices, utility bills, interest rates and other living costs will have a considerable impact on the budgeting efforts of property owners repaying a home loan.
The start of the year is an ideal time to re-evaluate your mortgage choices and prepare a new, forward-thinking budget to help mitigate stress caused by concerns about living costs such as utilities, clothing, food costs and interest rates.
The reality of the ‘Great Australian Dream’ is that repaying a mortgage can be challenging at times. A financial review can lessen the burden and put you in good stead for the year.
Remember, you’re not alone. Our financial coaching can assist with budgeting, revising your repayment strategy and determining how you can make the most of your home loan and other debt commitments.
Remember, you’re not alone. Our financial coaching can assist with budgeting, revising your repayment strategy and determining how you can make the most of your home loan and other debt commitments.
Consider these five essential mortgage management tips:
Step 1: What are you getting for your dollar?
Financial circumstances and lifestyles change, as do your needs. Consider how competitive your lender’s interest rate is, what features you are paying for and aren’t using or don’t have and need, the fees you’re payingand the cost vs. benefit equation for switching loans and/or lender.
Step 2: Can your mortgage work better for you?
Are you throwing lump sums into the loan account when possible e.g. your tax return, bonus or leftover wage? Every cent counts in helping to reduce the interest owed and the loan term. Plus, contributing more when you can helps build a financial buffer for times of need.
Step 3: Are you repaying at a higher rate?
Consider repaying your mortgage as though its interest rate was at least two percentage points higher, thus preparing yourself for rate rises and unexpected financial changes. This will encourage a good savings habit and make adjusting to increased living costs and interest rates less difficult.
Step 4: Still struggling with repayments?
Consider repayment reduction strategies such as extending your loan term or debt consolidation. Keep in mind this will stretch your debt over a longer period, attracting interest with every extra month. You’ll need to weigh up the financial and emotional advantages and disadvantages beforehand.
Step 5: What are you actually spending on?
Are you spending more money than necessary on transport, entertainment, takeaway food and other luxuries? Regularly list your expenses to discover where savings can be made. Once you’ve revisited all of the above steps, re-do your budget so you really are beginning the year confidently ahead.
