The most important thing about getting into debt is being able to get out of debt!
Congratulations, you have your own home! Unfortunately for most the debt lingers on. Is your home debt something you prefer not to think about?
For many the buying of the home is an end in itself; then the mortgage is left and ignored in the background, accepted as a part of life.
At Integrity Finance Australia we believe buying the home and obtaining the mortgage is only half the battle, the other half is paying off the debt! Here are six steps you can take towards that goal.
1. Read last month’s article
Last month we presented an article with seven steps to take to cut your debt. This was targeted towards consumer debt. Where you have home and credit card debt you need to get the credit card under control first! Go back and read that article (go to our website or contact me for a copy in need). Those seven steps equally apply in targeting home loan debt, remember to target highest cost debt first.
2. Review your repayments
Are you only making the minimum repayments? Interest rates are currently at record lows in Australia, in this environment it should be easy to make extra repayments. Consider making fortnightly repayments of half the monthly minimum, that equates to paying an extra fortnight repayment every year!
3. Offset account
With an offset account attached to your loan, every dollar every day in your transaction account saves you interest on your home loan, helping you pay it off faster! You need to know how this works and understand how it can work for you, if unsure ask.
4. Review your interest rate
Yes interest rates and loan options are complicated. That is one reason why most home loans in Australia are now submitted to banks via mortgage / finance brokers who can advise you on what interest rates and loans are available (at no charge to you!). Do not put this in the too hard basket, your loan should be reviewed every two years or when circumstances change. Savings of thousands of dollars can be achieved.
5. Rewarding yourself
Received a lump sum windfall? Inheritance, tax return, bonus pay or a win on the pokies – the best way to reward yourself may be to put it on the home loan: Do you really need those new shoes?
6. Stick to the plan – and ride out the setbacks
Keep going with your budget. Set a repayment plan, regularly review your position. Unexpected expenses will arise, it is how you deal with that situation which will determine your happiness, and your ability to say goodbye to your home loan.
Daryl Borden, Integrity Finance Australia Ph. 03 9511 8883 ACL 392184