There are many ways to manage loan repayments after buying a home. But what’s right for you? Here are some options for you to consider. With some careful planning, your repayments don’t have to be a financial headache.
How you repay your home loan comes down to your individual situation, but a goal to aim for is ensuring you can pay it off comfortably and not over-commit. Have a look into these options that may make your home loan repayments a little easier.
Multiple debts and the multiple interest rates, fees and charges that come with them can affect your ability to make solid progress on paying down your debts.
Consider rolling your debts into a single loan account with one interest rate and a fixed repayment period. Consolidating your debt helps you to know how much you will have to pay on a monthly basis until you are debt-free.
Another option is to cancel numerous credit cards – or consider keeping just one credit card – as this will limit potential future debt.
Depending on your circumstances, you might consider the option of home loan refinancing, which allows you to change your existing home loan. Provided the lender is satisfied that your application otherwise complies with its normal credit assessment and the loan meets your needs, you may be able to refinance to consolidate personal debts and roll them into your home loan, finance a renovation using the equity from your home or to raise cash for a purchase like a car.
It is also a popular option for those who think their current lender’s rate isn’t staying competitive with others in the market. However, be mindful of refinancing to simply land a lower interest rate. Think about the entire life of the loan and research the costs of switching lenders including entry and exit fees, stamp duty, valuation and legal fees or ongoing account keeping fees etc.
Paying down versus investing
By paying down your mortgage, you may be able to reduce the amount you pay in interest. You can accelerate paying down your mortgage by switching from monthly to fortnightly repayments. This allows you to fit in the equivalent of one extra monthly repayment a year.
Investing in property still has risks attached, as the market can change and the value of the property can be affected. Speak to a financial adviser to have a sound financial plan before you invest.
Repaying a loan is a long term strategy but these tactics can be useful. Investing in property can have tax consequences, so we recommend you speak to your accountant or tax adviser to get more information on how you can best manage your loan accounts and help you work out the best strategy for you.
This article provides you with factual information only, and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. Neither Pepper nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in this article. For information about whether a Pepper loan may be suitable for you, call Pepper on 13 73 77.