Struggling to keep up with your mortgage repayments? Don't worry, you're not alone. Check out these 3 effective strategies to reduce your mortgage costs and save money in the long run. Refinance, make extra repayments, or extend your loan term – which one is right for you?
For many people, having a mortgage is the largest and longest ongoing expense they face – And the current market isn’t helping! Interest rate rises and inflation are only causing repayments to become more volatile. As a result, finding ways to reduce these repayments can be a major concern.
So here’s how you do it –
1. Refinance Refinance Refinance
I don’t know how many times we can say this, but refinancing is often your best option to help you reduce your rates and thus your repayments. This can be done by renegotiating your mortgage terms with your current lender, or shopping elsewhere! Heaps of banks like to offer tempting rates and cashback offers (Up to $5k!) for new clients – So why not take advantage of that?
Here’s a real life example of how it could work:
If you’re currently paying 6% on a $600kloan with a Big 4 bank, and you were to refinance to 4.89%, you’d already be saving $397 a month.
If that isn’t appealing enough, this would equate to saving $23,797 in just 5 years. Insane right?
2. Make Extra Repayments
Reduce your principal! If you have the means to make extra repayments – do it. This is a simple yet effective way of reducing your mortgage repayments. By overpaying your minimum, you thus reduce the principal of your loan faster and lower the amount of interest you’re paying overtime.
Ever heard of making a mountain out of a mole hill? That’s what we’re doing here! (But, in a good way). Depending on the value of your extra repayments this may be more of a slow burn, but overtime it will make a big difference in reducing your overall mortgage costs.
3. Extend your loan term
This may seem daunting at first, as it isn’t always ideal to delay the completion of your mortgage. But – sometimes you gotta do what you gotta do! And this may be the right move for your financial situation.
Extending your loan term will spread out your repayments over a longer period of time, and thus reducing how much you pay each month. When you’re back on your feet, you can always start making additional repayments to catch back up! Just keep in mind, extending your loan term will also mean that you will be paying more interest over the life of your loan.
At first reducing your mortgage repayments may feel overwhelming – But, the cost of living is going up and I can assure you that we’re all facing the same thing! Rest assured, there’s always ways to make your mortgage more affordable.
Staying on top of your rates and ensuring you’re getting the best deal possible is the best place to start, and will assist your financial security for the long run.