10 Tips to Keep Your Mortgage Under Control... or If All Else Fails - Refinance!
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The RAMS team has compiled a list of ten handy hints that can help you maximise your mortgage repayments and still enjoy the quality of life you desire… while chipping away at the goal of owning your own home 100%.
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1. Keep your eyes on the prize
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Paying off a mortgage isn't ordinarily something that people can achieve in the short term. It's generally more of a long term goal, particularly given the significant amount that one generally needs to borrow in order to purchase a home.
So, it's important that you consider your home loan repayments as little steps towards the big prize at the end – financial security and the knowledge that you own your home completely.
You could consider keeping a quarterly or yearly track on your repayments so that you can see how your savings and extra efforts are helping you achieve your long term goal.
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2. Keep your repayments set
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Even if interest rates drop, it's a good idea to keep your mortgage repayments set at the higher rate.
Every bit of extra money that you put over onto your home loan helps to reduce the interest on the loan and reduces the amount you owe. It may seem minimal, but when it comes to a mortgage, every little bit of extra money helps.
So, ignore the ups and downs of interest rates and keep your repayments set.
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2. Pay off extra whenever you can
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Consult your lender to see if you are able to make extra repayments, whenever you have the money, without being penalised. Then, try and put extra money over to your mortgage whenever you can. If you get a raise, win lotto, inherit money or even get some as a gift, one of the best places to get your money really working for you is on your mortgage.
If your mortgage repayments are set for monthly repayments, you can also consider changing to fortnightly repayments. There are 12 months in a year, but 26 fortnights – so that means more repayments on your mortgage if you make the change.
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3. Consider a fixed rate
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If you really want to manage your budget and not be concerned about changes to your mortgage repayments, you can consider fixing your rate so that you know exactly how much you will be paying each month. With interest rates still at such a low, now may be an ideal time to consider fixing the interest rate on your mortgage – before rates rise any further.
You could also consider fixing a portion of your home loan and keeping the other set at a variable rate. Speak with a RAMS Consultant to find out about the options available.
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4. Consider a new loan – renegotiate
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If you find that your current home loan has all sorts of 'added bonuses' that you never use, yet are paying to have, then it's a good idea to speak with your lender and renegotiate your loan to a simpler, more suitable (and less costly) loan structure.
You can also look at whether it's a good idea to alter the rate structure on your loan (as noted above).
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5. Collect your loose change
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You'd be surprised by how much small change you can save each year if you empty your pockets and your purse regularly and collect your coins in a jar. The money almost seems to grow overnight!
When you've saved up a 'goal amount', say $100 or more, take your coins to the bank ('do not pass go!') and add them to your mortgage account. Easy saving! Check whether any fees apply for making additional repayments above your minimum monthly repayment amount.
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6. Count up your savings each month
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Everyone loves a bargain, so try 'adding up' the money you save each month on 'bargains' at the supermarket or on your clothes etc. Then, if your budget permits, transfer some or all of the savings you made over to your mortgage.
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7. Don't touch
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Even if your mortgage has a redraw facility, try NOT to touch your money unless absolutely necessary. If you do have this facility and find that you are inclined to 'borrow' from your mortgage quite regularly, it might be a good idea to put a stop to it and find a new home loan - without redraw - that prevents you from 'stealing' from yourself.
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8. Budget and plan ahead
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Set yourself a budget so that you know what your mortgage repayments are each month and be sure to include them as part of your regular outgoings. You can even set aside a certain amount of 'extra' money that, if not spent at the end of the month, you automatically transfer over to your mortgage.
If you are planning any significant outgoings, such as a holiday, renovations or even time off work for health or family reasons, you need to be sure that your budget is set so that you can continue with your mortgage repayments despite the extra outgoings.
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9. Get covered
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In the current economic climate many people are concerned about job security and their financial future as a whole. If you don’t already have income protection and life insurance cover, then now is the right time to make sure you get yourself covered.
Income protection will ensure that your mortgage is covered, for a certain agreed period of time, should you lose your job or be unable to work due to illness or injury.
If you run your own business, it's also a very good idea to make sure you are insured for any loss of income due to fire, theft, damage, illness or injury.
Similarly, taking out life insurance means that your family is covered and won't be left with mortgage woes should anything happen to you.
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10. Make your mortgage work harder for you
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You can get the money in your mortgage account working even harder for you if you link an offset account to your home loan account. For instance, if you have your salary paid into the offset account that runs alongside your home loan account, you can then use a linked credit card for all your monthly expenses and simply pay the credit card bill each month directly from your home loan account.
This means that the money that's sitting in your offset account works to reduce the interest that you pay at the end of each month on your home loan account. This way, you get to use your money, but you have it working even harder for you at the same time.
Or, do you need to refinance?
If your living situation has changed since taking out your mortgage, for instance, you've started a family, got a new job, started your own business and now your mortgage simply doesn’t suit your new current lifestyle, then it might be time to refinance.
The RAMS Home Loans team has developed a Re-Calculator check list that will be able to assist you with assessing your current loan and consider the potential pros and cons associated with refinancing your loan.
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Make an appointment to meet with a RAMS Consultant for more information.
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Click here to register and access the checklist
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Or talk to a RAMS consultant directly on 13 RAMS that's 13 7267.
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