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 seven steps you can take towards that goal.
1. Read last month’s article
Last month we presented an article with eight 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 us for a copy in need). Those eight steps equally apply in targeting home loan debt. Remember always to target highest cost debt first.
2. Review your interest rate
Yes, interest rates and loan options are complicated. That is one reason why approximately 70% of all 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 your financial future in the too hard or too lazy basket, your loan should be reviewed every two years or when circumstances change. Savings of thousands of dollars can be achieved. Don’t complain about rates and banks if you have not tried to do anything about it yourself.
3. Review your repayments
Ensure your repayments are made by direct debit, from an account with buffer savings, removing monthly repayment stress.
Then consider - are you only making the minimum repayments? Whilst interest rates have increased substantially, they are still low relative to previous decades. Are you able to make extra payments? Consider making fortnightly repayments of half the monthly minimum, that equates to paying an extra fortnight repayment every year!
4. 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 advice.
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.
7. Debt Consolidation
Consolidating debts, such as credit cards or personal loans, into your home loan can mean paying an overall lower interest rate and improve your cash flow. For those with multiple debts who feel like they are losing control, this may be the best solution.
Remember, if you feel you’re struggling to meet mortgage commitments it’s best to act now, rather than let the problem spiral out of control. Speak with your mortgage broker today to explore how you can better manage your mortgage. We have recently been assisting many new clients coming to us for assistance in dealing with mortgage stress.
Integrity Finance Australia has been serving the community since 2006. If you have any questions or want to know what your options are with your borrowing capacity or your home loan, then please email support@ifafinance.com.au , or call us on 03 9511 8883.