Managing your mortgage doesn’t have to be complicated – from selecting the right package initially to managing your way through potentially tricky situations that may crop up over the term of your loan. Here are a few tips which may assist you.
Consider fixing your interest rate
With rates unlikely to get any lower, now could be the last time that you can fix your mortgage at an historically low interest rate. Fixing your interest rate will come at an increased cost – normally about one percent higher than what you are currently paying - but this is the price to pay to have control.
Ensure that you have the right mortgage
The best time to research mortgages is before you buy a house. Don’t restrict your research to your current bank - compare home loan packages and rate them accordingly, alternatively, contact a good mortgage broker for advice.
Some lenders offer attractive initial rates for a defined period of time to get you in the door, but once the initial offer period is over a higher rate will apply. You may also face steep penalties and exit fees if you want to refinance after the initial period of lower interest rates is over.
Pay off more than your minimum repayment amount
Paying off even a small additional amount monthly can save you a whole lot in the long run. It can also create a buffer for you which may enable you to weather problem situations that may arise in the future – such as illness, unemployment and so on.
If you already have a mortgage and are starting to feel the squeeze
Discuss options with your current lender - find out whether there are any other options available to you, such as renegotiating your loan with lower transaction fees or a lower interest rate.
Find out what options exist to restructure your loan – if you have any money available to redraw, this may be incorporated into the loan to lessen your repayments, or you could extend the term of your loan. You need to consider though, that extending the term of your loan, while reducing repayments will mean that you will pay more interest over the term of the loan.
Refinancing options should be approached with caution – before you decide to go this route, establish the break-out costs and exit fees that will be applicable – these may obviate the benefits of a lower interest rate in a different loan.
Generally though, you should start with your family budget – if you can pay off credit cards and other high-interest debt, this should be your first port of call.