Top ten tips to beat the mortgage drain

1. Make extra repayments on your home loan

Making fortnightly or weekly repayments on your home loan instead of monthly can help reduce your mortgage over time. If you have the opportunity to pay a lump sum into your home loan, for example from your tax return, then we recommend you put the extra money into paying down the balance of your home loan. You will notice that the amount of interest you have to pay each month is also reduced.

2. Keep paying at your old interest rate

In the past year, we have seen interest rates drop, which will an effect on your monthly repayment amount. However, many financial experts advise home owners to maintain their existing home loan payments (whenever a rate drop occurs) in order to save thousands of dollars in the long run.

3. Get the right home loan for you: refinance your loan if necessary

Is your home loan full of hidden fees and features you don't use? Do you know whether your current home loan is still suitable for you? We recommend that you speak to a qualified mortgage broker today about a home loan review. Your mortgage broker will recommend whether your current home loan is still the best option for you based on your needs and current circumstances.

4. Cut back on personal spending

Cutting back even just a little on your personal spending can help to make paying your home loan easier. Some simple ways to save extra money include bringing your lunch to work or cutting down on the number of coffees you have everyday. For example, if you bring lunch to work everyday instead of eating out, you could potentially save $2,600 a year!

Consider going to the local library, go camping or travel locally instead of heading overseas. The extra money you save can then be put towards paying down your home loan.

5. Consider switching to a fixed rate loan

If you are on a tight budget and you want to know the exact amount you'll be paying each month, then you should consider fixing part of or all of your home loan. Before you get a fixed rate home loan, make sure to seek professional financial advice first. Your mortgage broker will be able to advise whether a fixed rate loan or a split home loan is the best option for you based on your needs and current circumstances.

6. Renegotiate your interest rate

The home loan market is constantly changing so if you've had your loan for a number of years, it may be possible to try to renegotiate your current interest rate. Talk to your mortgage lender and see what they can offer. Alternatively, you can speak to a mortgage broker about refinancing your home loan.

7. Ask your mortgage lender for help

If you've lost your job or you're taking time out to look after your baby, ask your mortgage lender about taking a "pause" from your home laon repayments. Lots of mortgage loans offer this facility but beware it could extend the life of your home loan or increase your home loan amount (the deferred interest will be added to the mortgage loan balance). It may only be for a short period of time, usually for 3 - 6 months.

You can also reduce your home loan repayment amount if you are struggling, by:
• extending your home loan term
• changing to interest only repayments
• re-negotiating your interest rate with your mortgage lender

Speak to your mortgage lender for more information on the above options. Most lenders also have hardship provisions for their customers in trouble so we recommend you seek help before it's too late.

8. Be prepared

If you're planning on starting a family or undertaking a major renovation on your property, then be sure to plan ahead. For example, loss of income or any extra expenses as this may impact on your mortgage commitments.

Make your mortgage work for you. For example, consider getting an offset account which is linked to your home loan. Your salary can be paid into the offset account. When you use a credit card for all your monthly expenses, you can move the money out of your mortgage and onto the credit card when your monthly bill is due. This will allow any money sitting in your offset account to reduce the amount of interest paid at the end of the month on your home loan.

9. Be disciplined

Think before you spend. Do you really need that new handbag? Put the money towards your home loan repayments instead.

10. Get appropriate insurance

If you are worried about the current economic climate and your job security, then we recommend that you consider taking out income protection or life insurance. These types of insurance policies will protect you and your family in case you lose your job or are unable to work due to illness or serious injury.

For more information about reducing your home loan or if you need a home loan review, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45.