Mortgage Tips

March 11

Now, more than ever, homeowners need trusted advice so they can consider their options and plan ahead.

There are lots of ways to structure finances to meet each individual’s circumstances and aspirations and just shopping for the cheapest rate can actually cost more in the long run.

Before you go in for a Home Loan 

Start your savings early! Demonstrating a good track record of saving is key to getting a loan approved, plus it will help get you into the habit of setting aside some of your salary each payday for when you do have a mortgage.

Protect your credit rating. Pay credit card bills on time and don’t change address too often. Even small fines, or debts, if loaded with a credit agency, can result in loans being turned down. Don’t miss out on a house because you forgot to return a DVD to the video store on time!

Begin arranging the loan at the start of the house-buying process. Apply to get your home loan pre-approved. It gives you more bargaining power. Did you know not all lenders require a 20% deposit? There are ways that a home loan can be arranged even for buyers with lower levels of deposit!

If you have a Mortgage?

It helps to increase your regular mortgage payments by as much as you can possibly afford. An increase of just $20 can take years off your mortgage. And, keep mortgage payments the same even if the interest rate drops – you’ll save money on interest and pay off your mortgage faster.

Pay off your mortgage as fast as possible.   Consider all options: from making lump-sum payments to using pay increases to reduce debt. Shorten your term loan: change a $250,000 mortgage from a  30 year loan term to 25 year loan, saving up to 20% in interest rate charges: that’s $95,000!

Paying lump sums off your mortgage saves you a heap of money. $10,000 off a $250,000 mortgage could shorten your loan term by as much as five years. And, save you 23% in interest rate charges – that’s around $108,000! So, if your mortgage is coming off a fixed rate get some independent advice before you do anything else.

Facing Mortgage Stress?

Consolidate other debts.  Consolidate those high interest credit card and hire purchase debts into lower interest rate personal loans or add to your mortgage.  And, make sure that you always pay off your credit cards in full each month to reduce interest.

Begin planning ahead.  Review your budget (and write it down!).  Do you need to cut back on some things to make up for higher mortgage payments?

Lengthen the term of the mortgage.  This reduces monthly payments:  some lenders now offer up to 30 years.

Reduce your borrowings.  Look at selling assets or using savings to pay off the mortgage.

Switch to interest-only payments.  You can reduce your overall payments by switching to interest-only payments.  (This is a short-term option though.)

Act now!  Don’t sit back and wait for problems to get worse. 

For unbiased advice and to find out what option is best for you talk to your local broker!