With the cost of living in Australia skyrocketing recently, many families are looking for ways to reduce their living costs. One of the most effective ways to do this is to reduce your housing costs. However, this is easier said than done. If you own your home, you can’t just look elsewhere for a lower rent price. However, did you know there are ways to reduce your mortgage payments?
From refinancing your rate to understanding what you’re paying for, there are a lot of expert-backed tips for reducing your mortgage payments in 2023 and beyond. Reducing your housing expenses means less financial burden on your monthly budget, giving you the chance to meet your goals.
1. Refinance Your Mortgage
First, the most powerful way to reduce your mortgage payments is to refinance. Not only can this massively lower payments, but it can save you thousands (or more) over the life of your loan. When you refinance your mortgage, you essentially pay off your existing loan with a new one.
Why go through the process of re-applying for a home loan? If you’re in a position to secure a better interest rate or terms, this can be well worth any fees. That being said, you should consider your eligibility and the current market rates before you apply.
2. Adjust Your Loan Term
Next, you can also adjust the terms of your loan. If you lengthen the duration of your loan, your monthly rate should drop with it. While you might be adding interest over the life of your loan, this could relieve some of the stress you’re feeling at the moment.
For example, if you have around 20 years left on a 30-year mortgage, you might refinance to a new 30-year loan at the same rate. Though the loan largely stayed the same, your monthly payment should be lower.
3. Apply for Financial Hardship
If you find yourself behind on your mortgage, you might need to pause your payments altogether. This is known as financial hardship. If you’re experiencing a temporary hardship (job loss, illness, etc.), talk to your lender. They should have some form of hardship program in place to help.
While this will postpone payments temporarily, it won’t last forever. You will need to repay any missed payments throughout the life of your loan.
4. Shop Around for Home Insurance
Having home insurance as a property owner is a must. It protects your home in case of theft, damage, or natural disaster. However, this adds to your total mortgage costs each month, and you might need a bit of relief.
If this is the case, shop around for a different home insurance premium. Reviewing your property insurance policy should be a regular part of your financial routine. You might easily find a better deal by shopping around.
5. Refinance to Remove Mortgage Insurance
If you applied for a home loan with less than a 20% down payment, you likely have what’s known as Lenders Mortgage Insurance (LMI). This is a type of insurance for the lender to cover the risk of any outstanding balance if you’re unable to pay your loan.
However, you don’t need to pay this added fee forever. If you have at least 20% in equity, this insurance is not usually needed. Additionally, you can pay down your principal with any extra cash to get rid of this insurance.
6. Rent Your Space
Another idea is to make the most of the space you have. If you have an extra bedroom or addition to your home, you can rent this to a tenant to offset your mortgage payment.
In the personal finance community, this is known as “house hacking” and it can make a huge difference. This can give you a big boost in your monthly budget, making it possible to build an emergency fund or pay down debt.
7. Assess Your Property Tax
Property taxes can be costly depending on where you live, and it might be time to reassess your current taxes. These rates are based on each city’s tax assessment of how much your home and your land are worth.
In most places, you can request to have your property reassessed by your local government. If approved, your taxes will decrease to meet the current tax rate.
8. Choose the Right Property
Last but not least, real estate is complicated and far from one-size-fits-all. You should always consider the long-term affordability of your home and land before making a purchase. If you no longer feel like your home’s mortgage is the right fit for your budget, it might be time to make a change.
Downsizing or moving to a lower-cost-of-living area can have the biggest impact on your mortgage payments. While selling your home might not always be an option, it’s important to know what’s right for you.
Need Help with Your Payments?
Are you struggling to afford your current mortgage payments? Debt Busters can help. Contact our team of experts today on 1300 368 322 to review your unique situation.
Whether your mortgage is too expensive or you need a long-term debt repayment plan, we’re here to help. Everyone deserves a home they can afford.