Tips For Managing a Mortgage

One of the big questions about personal finance is how to afford a home. Never far from the headlines, the challenges of housing affordability and managing a mortgage can be a major source of stress for Australians. The paradox is, of course, that a home should be a place of comfort.

While mortgages are a huge commitment, making a budget that truly reflects the cost of a mortgage can minimise the risk involved, according to Founder and Director of MyBudget, Tammy Barton.

Tammy, and MyBudget, are dedicated to helping Australians improve their personal finances and reducing money stress. To date, MyBudget has helped over 75,000 Australians, many of whom have had mortgages that felt unmanageable. By planning ahead and minimising the additional costs, getting ahead of a mortgage is very possible.

Here are Tammy’s answers to some of the common mortgage questions.

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Should I be making extra payments on the mortgage?

If your mortgage is your only debt, then absolutely. Pay down as much as you can afford because the faster you reduce your mortgage, the less interest you’ll pay over time. Because mortgages stretch over 15 to 25 years, even small extra payments, the type of small change that most people wouldn’t miss from their budget, can make a huge difference.

Also, use any pay increases, tax returns or unexpected windfalls to top up your mortgage as this can take off thousands of dollars and years from your mortgage.

However, if you have any outstanding high-interest debts (credit cards, store charge cards, personal line of credit), you should pay them off first. The average credit card interest rate is around 18 percent per annum which, on the average card balance of $4,200, costs the cardholder over $700 in interest a year.

Should I pay weekly, fortnightly, or monthly?

If people take their current annual repayment figure and divide it by 52 weeks, the interest saved is minimal. But most people will take their monthly repayment and divide it by four, which will result in higher annual payments.

It doesn’t matter if you’re repayments are fortnightly or monthly, what’s most important is having the frequency for your repayments and what will give you the most financial visibility. For example, set up your mortgage repayments in line with your pay cycle. This makes the most budgeting sense and is the easiest way of tracking your finances.

And remember to shop around for the most competitive mortgage rate in market, as that will be your biggest benefit.

How can I create a budget that factors in the inevitable interest rate hike?

It’s really important to plan ahead for interest rate rises. Budget for a higher repayment now and start paying it from day one. This will help you get ahead with your payments and, if rates do go up, you won’t notice any difference.

When you’re shopping for a home, don’t just focus on the price and how much deposit you’ll need – also think about how the repayments will affect your lifestyle choices. Do the repayments leave enough cash in your budget to live comfortably plus do some renovations, keep that expensive gym membership, and take a holiday every now and then?

Mortgages are one of the biggest commitments that most people make in their lifetime. While it’s important to think seriously about signing up for such a large debt, planning ahead can take the stress out of the situation.

Follow Tammy’s top three tips to keep your mortgage under control:

If your mortgage is weighing you down, call MyBudget today on 1300 300 922 for a free and no obligation consultation with a MyBudget money coach. Enquire now!

We analyse your situation and design a plan that achieves your goals.

Until you’ve examined your finances in detail, it’s difficult to determine your exact financial position. At MyBudget, the budget plans we prepare are true long-range money management plans. The plan projects your finances over a 12-month period. So you have a clearer picture of what your future looks like, not just how your budget is week-to-week.

What will you do with your savings? Reduce your mortgage? Invest in shares? Take a holiday? Or simply enjoy the feeling of satisfaction that comes with having savings to fall back on.

Personal budgeting is the only way to truly gain control of your money and your financial future.

The benefits of personal budgeting:

  • Personal budgeting is the only way to gain a thorough understanding of your financial situation.
  • Personal budgeting ensures that you always live within your means, and provides a safety net for inevitable changes in life or when things go wrong.
  • Personal budgeting is the key to accumulating savings and achieving your financial goals.
  • Personal budgeting is one of the most effective methods for paying down debts and avoiding ongoing debt in the future.

Thousands of people come to MyBudget every year seeking our support and advice about managing their money. We can provide structure, support and guidance to help you get on track.

Get expert help from people who care.

MyBudget’s strives to find a solution for every individual. Unlike an App or spreadsheet program, our experts create a plan that’s specially designed to address your needs and priorities.

We also understand that the hardest part about budgeting is sticking to it. That’s why we do the legwork for you. We can manage your budget, pay your bills, save for you, and communicate with your creditors, if necessary.

Succeeding is easier when you have a team of experts supporting you along the way!