TIPS FORMANAGING

YOURMORTGAGE

REPAYMENTS

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P R E S E N T E D B Y D E P R E C I A T I O N . C O M

We know how stressful it can be tokeep up with your mortgage

repayments, so we thought we’dshare some mortgage repaymenttips with you. These tips should

make paying your mortgage easierand could potentially cut years off ofyour repayments. Happy saving!

CREATE A BUDGETOnce you have found a loan with arepayment plan that suits your

lifestyle, you need to make sure thatyou set yourself a realistic and

manageable budget that will helpyou to keep up with your

repayments. Establishing a routineand sticking to a budget is the most

effective way to manage yourfinancial well-being and prevent

money worries from taking over yourlife.

ALIGN PAYMENTS WITHYOUR SALARY - MAKE THEM

WEEKLY OR FORTNIGHTLYAligning your repayments with your salary cuts downyour interest payable and will potentially save youthousands of dollars in the long run. Let’s look at thisexample from Intuitive finance - Say your monthlyrepayments are $2,000. By the end of the year, you’llhave repaid $24,000 (not accounting for interest). Ifyou change this to $1,000 a fortnight, by the end ofthe year you’ll have repaid $26,000. How? Becausethere are 12 months in a year… and 26 fortnights.

Basically, you squeeze in an extra month each year,

which can take a couple of years off your mortgage.

You might as well do everything in your power to payyour mortgage off as soon as possible!

ONLY REDUCEPAYMENTS AS A LAST

RESORTWhen variable interest rates fall, many borrowers decide toreduce their repayments. Although this is necessary whenfinances are really tight, if you can manage to keep yourrepayments as they are, do so. This can help you to pay off

your loan more quickly. On the other hand, if rates have beenconstantly steady, consider adding an extra $20 or so ontoyour regular payments. The more you pay now, the better off

you’ll be down the track!

Have you applied to reduce your repayments with an interestonly loan structure? If so, check out the government’s

MoneySmart - it has some useful information for customersusing an interest only repayment period and some easy to

follow infographics highlighting the advantages anddisadvantages of this type of lending structure.

HAVE AN OFFSETACCOUNTAn offset account is a transaction account that is linked to aneligible home/investment loan. When you have an offset account,

you don’t earn interest on your savings. Instead, the interest on yoursavings works to reduce the amount payable on your loan.

The more money you have in your offset account, the less interestyou will need to pay on your home loan.

PUT LUMP SUMS IN YOURMORTGAGE ACCOUNT

Although it’s tempting to put lump sums (like tax refunds, workbonuses, inheritance or dividend payments) into leisure purchases,

consider investing them into your mortgage instead, as large lumpsums can cut years of interest off your loan term. If you want to pay

off your mortgage as quickly and efficiently as possible, the pooltable might have to wait!

PAY MORE THANMINIMUM (IF YOUCAN AFFORD TO)

Did you know that when you pay the bare minimum on yourloan, most of your monthly repayments go to paying off

interest? This means it can take you years to significantlypay off your debt.

Paying a little more than minimum can help you to startchipping away at your loan balance now, and potentially

shave years off your repayments. Let’s look at this examplefrom AFA Website: Imagine you have a $300,000, 30-year

loan at 5.08% pa interest, with repayments of $1,625 amonth. By increasing your repayments by just $100 a month,

you can pay off your loan more than three and a half yearssooner, and save $42,000 in interest. Increase your paymentsby another $100 a month, and your mortgage could be paidin full after just 23 years, with interest savings of more than

$73,000.

YOUR OVERALL GOAL SHOULD BETO PAY YOUR MORTGAGE OFF AS

QUICKLY AS POSSIBLE, AS THISWILL SAVE YOU THOUSANDS OFDOLLARS IN THE LONG RUN. FOR

MORE INFORMATION ABOUTMANAGING YOUR MORTGAGE

REPAYMENTS EFFECTIVELY,CHAT TO YOUR MORTGAGE

BROKER OR A FINANCIALADVISOR.

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