December 19, 2013
With the cost of living on the rise and Christmas fast approaching, it can be difficult to stay on top of your mortgage repayments month to month.
Falling behind on your repayments can have a variety of negative consequences, including additional fees and increased interest rates. Furthermore, in some extreme cases, failing to pay your mortgage on time each month could result in you losing your home.
In order to avoid all of the above and continue to successfully meet your mortgage repayments each month, there are a couple of steps you can take:
1: Create a budget
Creating a budget is the very first thing you should do at the start of your loan. It may seem pedantic but it has to be done. We’re creatures of habit, so establishing a routine repayment schedule can be very effective in managing your financial well-being.
Furthermore, a budget can help you identify any places where you can improve your repayment schedule. For example draw up a table with monthly expected income and next to it expenses (which excludes mortgage repayments). The difference between these two numbers should be your expected repayment for the month.
Update this each month to identify trends where you’ve overspent and what you can do to save money.
2: Pay off your credit card
Getting rid of your credit card can be one of the best things to do in terms of paying off your mortgage. If you can’t get rid of it all together then certainly get rid of the one with the higher interest rate. Australians are some of the highest users of credit cards in the world, so getting rid of bad debt can be the first step towards paying off your mortgage.
3: Make extra repayments on your mortgage
Although very difficult some months, if you are able to inject additional funds into your mortgage, this will ultimately prove very beneficial to you and your bottom line down the track.
Injecting an extra $50 a month into your mortgage could ultimately save you thousands of dollars on your mortgage and help you to pay off your mortgage sooner than expected.
4: Don’t borrow more money
A common mistake many people make when falling behind on their mortgage repayments is to borrow more money. Getting another credit card, asking friends or family for money or applying for short-term loans are all bad ideas. Don’t do it!
5: Communicate with your lender
Whenever you fall behind on your repayments ensure that you immediately contact your lender. Having an open communication line is very important since a mortgage is a long-term relationship. If you do happen to miss a repayment explain the situation so that you can discuss options that won’t hinder future repayments and can keep you on schedule.