22 Nov 2006

5 recommendations for mortgage management

With the official interest rate going up again by half a percent this time, worries about mortgage management seem to be on the rise as well. What if someone’s good to go for now but is concerned about the future? Instability means uncertainty, but we’re here to swipe your mortgage worries away. Read on to discover our 5 recommendations to help you manage your debt. 

1. Make bi-monthly repayments

Simply opting to fulfill your repayments bi-monthly instead of monthly can save you a substantial amount of money. It all comes down to timing. There may only be 12 months in every year, but there are 26 fortnights. Making use of all that, you'll end up making 2 additional repayments per year without even noticing.  

2. Use an offset account

For those having a variable home loan, using an offset account can be a useful tool. It can be used as a regular transaction account. The fact that the offset account includes money in it, alone, will reduce how much interest is paid on the loan. Unlike interest earned on money in a savings account, money sitting in an offset account will not attract any taxes.

3. Renegotiate your current rate

Knowing that current rates in the market vary widely, renegotiate your rate to make sure you're on the best deal with the lowest rate. It is advised that you go beyond the headline rate and consider the fees as well. It's really important to check the one-off and ongoing fees (like application fees, monthly fees, annual fees etc.) and inquire about which ones can be waived.

Not sure how your rate compares? Call a Fast Repay Home Loan broker and get all the assistance you need.

4. Prioritise making extra repayments

Deciding ahead of time to make extra loan instalments is a smart technique. This brings a person past the 'present bias' which is our preference for current possibilities over future alternatives. For example, if you manage to get a better deal on your interest rate, keep paying the higher amount. Alternatively, if you receive a tax refund or an unexpected bonus, you can decide to put some or all of it towards your mortgage.

5. Pay both principal and interest

According to the National Bureau of Economic Research, the principal is the amount you borrowed and must repay, while interest is the fee charged by the lender for giving you money. Most borrowers' total monthly payment to their mortgage provider includes items like homeowner’s insurance and taxes.

Make sure you're repaying both the principal and the interest. Your actual loan remains the same if you simply pay off the interest.

Need a broker to help with managing your mortgage?

According to the Journal of Urban Policy and Research, the Australian government has been focused on several policy interventions on the issue of housing affordability in Australia’s metropolitan areas. This means that there is a serious concern regarding financial stress related to housing affordability which links to mortgage acquisition and management.

Fast Repay Home Loan brokers are here to relieve you from the stress and make the process of acquiring the home loan that best suits you as swift as a breeze! We will handle all the heavy lifting for you and we’ll guide you through it all. So, what are you waiting for? Give us a call and let’s get you the mortgage you deserve.

Disclaimer: Information included in this post is of general nature, it has been prepared without taking into account your specific situation. It is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice. You should not make any decision, financial or otherwise, based on any of the information presented here without undertaking independent due diligence and consultation with a professional accountant or financial adviser.

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