If you’re a homeowner, you have likely wondered about paying less on your mortgage repayments. Maybe your financial situation has seen a significant change, or you would just like to know your options. Either way, wanting to know these things is incredibly reasonable. There is always a way to lower your monthly repayments.
People are always looking for ways to reduce mortgage repayments. Around a quarter of Australians are currently dealing with financial stress. On top of that, more than 60% of all household debt is in the mortgage. It has happened before, and it is something that will always happen. When interest rates rise, the economy takes a huge turn for the worst.
A home loan in arrears can very quickly become a problem. If you’re struggling with repayments or wanting to reduce them, keep reading!
How can you reduce mortgage repayments?
There are many effective ways that you can reduce mortgage repayments. These strategies can help by minimising the rate, balance, and duration. The key is to find the right mix of strategies that will work together well. This way, you can ensure they will fit your circumstances well. Let’s take a look at some of the strategies.
1. Find a loan with fewer fees
From lender to lender and individual home loan products, fees can vary significantly. Some home loans will have maintenance fees attached. These fees are charged monthly or annually while other loans will have no fees at all. Some lenders will also charge higher interest rates to account for any upkeep required.
Also, make sure that you always assess the pros and cons of the fees involved. A mortgage with no fees will mean nothing if the interest rate is higher than the standard. This is a tried-and-true way to reduce mortgage repayments.
2. Lower interest rate
Interest rates are quite low right now. That is why it makes sense for you to seek out a new interest rate right now. A lower interest rate will mean that you can reduce mortgage repayments. Even a small reduction will account for big savings over time.
You can start by seeing what interest rates are being offered by your existing lender to new customers and then, you can see whether or not these rates are lower. You will be able to ask your lender to reduce your rate to match this. Even if you don’t fully refinance, sometimes your lender will lower your interest rate. If you harbour a good repayment history, a healthy credit score, and at least 20% in home equity, this is a great option.
Don’t be afraid to branch out and look at your options.
3. Refinance and reduce
If you are in the midst of experiencing financial hardship, this one is a great option. It may make sense to reduce your minimum monthly repayment if this is the case. By choosing this option, you will likely extend your loan repayment length. It is super important to speak to a professional team, such as Debt Consolidation Australia.
With this option, not only can you reduce the monthly repayment amount, but you could also save on the overall debt amount due to potentially lower interest rates and fees.
4. Interest-only repayments
Switching to an interest-only option will mean that you’re able to pay off your interest. By doing this, you will be paying off the balance accumulating on top of your loan balance. You won’t be reducing the loan amount. This means that you must be prepared for increased repayments when the interest-only period ceases.
Most interest-only loans will last between 1 and 5 years. This is usually a far better option for property investors as opposed to owner-occupiers. There are tax incentives offered for investors, but it isn’t always the best option. These loans are also far more difficult to be approved for because they come with a far higher risk.
The interest-only period is the only time your lower monthly repayments will be low. These monthly payments will become steeper afterwards. It is just another way to reduce mortgage repayments.
Final words on ways to reduce mortgage repayments
At the end of the day, these are all great ways to reduce mortgage repayments. Just make sure you contact your bank or some professionals to ensure that you choose the right option. If money management is your issue, then reducing your mortgage repayments simply isn’t enough. That is why you should go ahead and seek help from a professional.
If debt consolidation is on your to-do list, contact a professional today. Contact Debt Consolidation Australia today to control your debt for a better future. A debt consolidation loan can help you gain control again. Get in touch now!