Feeling the pressure of hefty mortgage repayments? You’re not alone. With rising interest rates and shrinking offset accounts, many Australians are struggling to keep up with home loan payments.
Act Early for Relief
As financial pressures build, it's crucial to be proactive, and take action before the situation spirals. The earlier you reach out to your mortgage broker, the more options you’ll have for managing repayments. Whether you're cutting back on expenses or exploring relief options, waiting too long can limit your choices and increase stress. Many homeowners mistakenly delay seeking help, only to find themselves in deeper financial trouble. By contacting your broker early, you can explore options to ease the burden, like restructuring your loan or negotiating terms.
Start with Your Current Lender
Before jumping to refinance, talk to your broker to see if your existing lender can offer you a better deal. Many people overlook the possibility that their current bank might be willing to adjust the interest rate on their mortgage, especially if they're not on a fixed rate. This simple step can potentially save thousands without the hassle of switching banks. Your lender might be open to offering a more competitive rate if you express that you're considering other offers. While this doesn't always guarantee a significant drop in your repayments, it's a good first move that doesn't involve the costs of refinancing. Plus, it allows you to stay with a lender you're already familiar with.
Explore Refinancing Options
Refinancing can be a lifeline for those who have stable employment and sufficient equity in their home. By refinancing to a lower interest rate, you could reduce your monthly mortgage payments significantly. Another benefit of refinancing is extending your loan term. While this means you’ll pay off your mortgage over a longer period, it can offer immediate relief by cutting down your monthly payments. Refinancing can also open the door to additional features like flexible repayment options or offset accounts, which can help you manage your cash flow better. However, refinancing does come with costs, such as fees and possible break costs if you're on a fixed rate, so it's important to weigh the pros and cons with a financial expert.
Consider a Repayment Pause
For those facing significant financial changes, such as job loss or maternity leave, refinancing might not be viable. In such cases, many lenders offer a repayment pause, allowing you to temporarily stop or reduce your payments. This can provide immediate relief during difficult times, but it's essential to understand the long-term implications. A repayment pause may impact your credit score and could make it harder to refinance in the future. Additionally, interest will likely continue to accrue during the pause, which could result in higher payments once the pause ends. While this option can provide short-term relief, be mindful of how it may affect the overall cost of your mortgage in the long run.
Taking Control of Your Financial Future
In times of financial uncertainty, exploring your options for mortgage relief can provide much-needed peace of mind. Whether it's negotiating a lower rate, refinancing, or taking a temporary repayment pause, acting sooner rather than later can help you regain control of your finances. Be sure to consult with your broker or financial advisor to find the best course of action for your specific situation. By taking proactive steps, you can navigate this challenging period and find ways to ease the burden of home loan repayments.
Dream Catchers Lending is an MFAA-accredited member and a Certified Divorce Specialist. Feel free to book an obligation-free virtual appointment or leave us your details and we'll be in touch.
Photo by Andrea Piacquadio.