We always say, do what works best for your goals, needs, and situation. These tips to manage your mortgage, properly will give you ideas to save money, help give you cash in hand while paying down your mortgage.
1. Lower the interest rate if possible
If you have the capacity to get a lower rate, get on to it. Talk to your Financial Adviser to see what’s available for you – we’re finding some clients are getting in touch to break a fixed loan rate and lock in something lower for a longer period of time. If you have a refix due soon, now could be a great time to jump on the lower rate bandwagon, however we have seen some of the banks stabilise the increase.
2. Increase the term out to 30 years
The beauty of a long loan-term is that it lowers your repayments, giving you more cash in hand to do what you want to do. Giving yourself a 30-year term will put you on the minimum repayments, meaning this is the minimum amount you pay for principal and interest for your loan, which can give you some breathing room. Some consideration needs to be made about how this will affect your overall loan term and interest paid. Speak with a financial advisor about how this can work for you.
3. Know how to work principal & interest vs. interest only
Changing the full loan from principal and interest to interest only can help you save a heap of sweet cash. Or alternatively, split it between the two. Interest only loans can be helpful in the short-term, as this type of loan will keep your repayments as low as you can go.
4. Check out a Mortgage Cashback
Haven’t refinanced in a couple of years? Banks are very aggressive in getting you to switch to them, and change from the old lender you were previously with – often offering up some sweet onboarding deals like a mortgage cashback. A Mortgage Cashback is an incentive to get you to switch and they will pay you (in an ideal world) a couple thousand dollars for making the effort.
5. Utilise a latest valuation
When looking to refinance or refix, it can be a great time to review the valuation on the house! As this is an investment, assets can only go up in value (especially over the last few years) and you can look to leverage this price. This is especially helpful for people who got a home loan using a Low Deposit Loan, or anything less than 20%. With the value of your home steadily increasing, this can be a great opportunity to check out how much you own now, and get the full effects of capital gains!
6. Use your cash wisely
And by cash, we mean any money in general sitting around – particularly useful if you have savings just sitting, unused, in a bank account. By setting up a revolving credit (otherwise known as an offset facility), you can leverage this against the mortgage. It requires a lot of discipline, but the purpose of this is that you put your savings on the mortgage, lowering your home loan total. For example, say you’re a legend at savings, with about $50,000 sitting in an account. Maybe you’re halfway through paying off a mortgage, now valued at $550,000. If you utilise those $50,000 in savings and put that on to your mortgage as a revolving credit, you actually only pay interest on $500,000 on your mortgage.
The catch-22 to a lot of these is the management between day-to-day cash in hand vs. your loan terms and total mortgage repayments. For example, if you’re paying your mortgage off in accelerated fortnightly repayments (26 yearly payments compared to true fortnightly payments being 24) you can save five years off your loan term – which is crazy to think about! Even having a 30-year term is really long!
You’ve got options! Explore them.
You don’t need to choose just one option in regards to your mortgage. You can split between fixed and floating, principal and interest and interest only, stick with your current bank or move to a new one. How the loan is structured can be completely tailored to your own requirements. Speak to one of our Financial Advisers to see how we can structure your mortgage for today and the future.
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