We’re hearing a few stories in the media lately about families being forced to sell or move out of their homes due to defaulting on mortgage repayments. If you’re finding it difficult to make your mortgage repayments and are wanting a little wiggle room, this article will teach you 5 ways to ease the pressure of mortgage repayments and put more of your disposable income back into your budget WITHOUT chasing lower interest rates.
Watch Instead: I’m struggling with the affordability of repayments, what can I do?
1. Refinance
You can indeed refinance with a different bank. Most people think this is only a good idea when interest rates drop, but refinancing can also be a good idea when interest rates are high if your current rate has expired. Instead of staying with the same bank and refixing, other banks will offer you a cash contribution that can up worth up to 1% of your mortgage. This contribution can be used to offset the increase of interest on your mortgage repayments.
2. Extend Your Mortgage Loan Term with a New Bank
If you refinance to a new bank, you can potentially extend your loan term. Say you’ve been paying off your mortgage for a while and have 20 years left on it, you can ask your new bank to extend your term back to 30 years etc. This decreases the principal of your repayments as this is now split over 10 additional years. CAUTION: This is tactic should only be used in the most dire of circumstances as it moves you further away from financial freedom and puts a lot more money into the banks pocket.
3. Offset with Savings
If you have a savings account or some spare cash, you can put this in an offset or a revolving credit account. This means you have effectively zero interest on that portion of your mortgage.
4. Ask for some help if you have a hardship.
Every bank should have some hardship programme for those customers who are struggling with some sort of hardship such as job loss, income loss or health related reasons. If you’re really feeling the pinch, you can let your bank know that you need some assistance, and they will see if you qualify for the programme.
5. Look at the root cause
Finally, there may or may not be some other root issues going on below the surface that you might want to look into. Is it money decision making related? Are there other areas of your spending that you can cut back that before, when conditions were different, you could spend that large amount on traveling, clothes, cars etc? Is your partner slack at budgeting? There may be bad spending decisions or money behaviours that you can tweak to make your mortgage repayments a bit more affordable.
Don’t bury your head in the sand; if you are having difficulty making your mortgage repayments, take action because you do have options. If you’re reading this and saying “this is me” and are wanting a bit more help beyond this article, click the button below and we can review your financial situation and help you choose the right path to a more affordable mortgage.
Keep in mind this article is providing general information and not individual financial advice.
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