Re-Evaluate Your Mortgage

How long has it been since you last had a good look at the details of your mortgage?  Do you know where you are in terms of the progress you are making on paying it off, and importantly, is it still the best mortgage product to suit your needs?

With a long-term commitment like a mortgage, it's tempting to set it and forget it and to just make repayments as they are due.  But this can be a costly mistake.  It’s vital to regularly re-evaluate your mortgage and refinance where necessary.  New products are always becoming available, rates change often, and so can your circumstances. 

By regularly re-evaluating your mortgage you could make real savings, pay off the debt sooner or release equity to invest elsewhere.

If you presently pay your mortgage monthly, consider changing to fortnightly or weekly repayments (if your mortgage product allows). For example, if your monthly mortgage payment is $3000, half this to pay $1500 each fortnight and by the end of the year you will have paid off $39,000 rather than $36,000.

A minimum repayment is just that – it’s a minimum!  Many loans allow you to pay more than the minimum, whether it be ad hoc payments or regular overpayments.  Check with your lender as to the terms of your particular product to see how much you can overpay.

Even small increases can make a real difference.  Simply by rounding up a number or adding an extra $100 to your payments will reduce your mortgage. If you don’t think this is affordable to you, start thinking outside the box – consider about putting bonuses, tax returns and gifts into your mortgage and you’ll soon be on your way to clearing your mortgage faster.

Even if your lender reduces your repayments when fees or interest rates decrease, ask them to keep your repayments at the same level as before and you will pay down more of the principle with each payment you make.

If your mortgage allows for it, use an offset account. This is an account which is linked to your mortgage, and the amount of money in the offset account is deducted from your outstanding loan balance when the interest is calculated. For example, if your mortgage is $600,000 and your offset account has $20,000 in it, you will only pay interest on the remaining $580,000.

An offset account saves interest while still giving you access to your savings and for property investors, it means they can maintain the tax deductibility of the mortgage.

Shop Around For a Better Deal

Your mortgage needs to suit your personal circumstances and the loan you chose previously might not be suitable any longer. If your circumstances have changed, or are about to change, consider whether or not your current mortgagees by discussing your needs with your mortgage broker who will be able to find you the right product and negotiate rates with lenders on your behalf.  

But remember, you may be liable to pay break costs or other fees to your current lender if you decide to make changes to your loan, so this needs to be carefully explored when evaluating the benefits of making any changes.  

Your mortgage broker will be able to provide details of any potential costs to make sure you have the right loan to get that balance down sooner.

If you don’t already have an MFAA Accredited Finance Broker, call us at Zippy Finance today.  We have a panel of over 30 lenders to choose from and are experts in refinancing.