The great Australian dream of owning a home can become a challenge if you’re battling the repayments.
That is why it is important to have strategies in place during the life of the loan – to prevent mortgage stress – but to also plot your property purchase carefully. A clear-cut roadmap ensures you are not spending beyond your means.
Here are some tips you can employ to allay mortgage stress and ensure your family is living comfortably across the life of your loan.
Spend within your means
When you are house-hunting, it can be easy to rationalise going 'just a little bit' over your predetermined spending amount when a more attractive option presents itself. The grass is always greener on the other side of the fence.
But this can (and often will) lead to mortgage stress down the line as the repayments can become a bit too much to handle – especially if your work or health circumstances change. Knowing and sticking to your spend is critical to ensure you keep on track at all times.
Budget, budget, budget
This may seem like a common sense tip, but recent research has shown that 86 per cent of Australians don't know their monthly expenses. Another 82 per cent aren’t aware of their mortgage rates either, which paints a picture that many of us forget to budget effectively.
By using a budget calculator and being completely honest with your inputs, you can determine exactly how much you can spend on mortgage repayments without breaking the bank.
Consider an offset account
You can slash the amount of interest you are paying by linking an everyday transaction account – called an offset account – directly to your home loan. This account is still used as a regular spending option, but the more money you hold in it, the lower your interest payments will be.
The longer you hold money in your offset account, the better your interest rates will become along the way.
Make extra payments in the good times
If you are in a comfortable position with few debts (outside of your home loan) and no urgent spending required, consider making a few extra payments towards your home loan voluntarily.
This will give you room to move if you ever find yourself in a position where you are struggling to make these payments, especially if times happen to get tough or extra expenses pop up.
Assess the fine print of your loan regularly
If you are feeling the pinch of mortgage stress, it might be time to sit down with your lender to learn the options available to you.
Whether you seek the advice of your bank or mortgage broker, these experts will be able to assist you in finding the best interest rate for your needs. Beyond this, they’ll carefully review the types of products available to you, allowing you to avoid paying unnecessary service fees through banks.
If you haven’t had your mortgage assessed and reviewed in the last three years, we highly recommend opting for a home loan health-check.
If you’re looking for more guidance on mortgages, we recommend getting in touch with our team now. We’re always more than happy to guide you in the right direction in a no-obligation discussion.