These days with Mortgage interest rates on the rise and fuel prices being at an all time highs many of us are looking for ways to improve our cash flow, and to find ways to stretch our money a little further, sometimes a little extra money in our purse or wallet at the end of the month can make a huge difference.

There are many ways to do this and in the next few minutes I will go through some of the more effective ways you can make this happen by reducing your mortgage repayments.

1. Debt Consolidation.

This refers to a process where you can pay all or most of your debts by refinancing your home loan and combining debts like car loans and credit cards into your mortgage. The best way to demonstrate this is with an example.

Let’s say you have a mortgage with a loan balance of $250,000 you have had this loan for 2 or 3 years and have some equity in your home (ie. Equity is the difference the value of your home less what you owe on your mortgage, this difference is called your Equity).  In addition to your mortgage you might also have a $20,000 car loan plus a couple of credit cards with a total balance of let’s say $25,000. Now the monthly repayments on your car loan and credit cards will be about $945 per month, your existing monthly mortgage repayment is $1,705 so you current debt load per month is $2,650, now if we access some of your homes equity by refinancing we can pay off the car loan, pay off the credit cards and leave only the increased mortgage repayment to handle each month. Now this may sound a little like rearranging deck chairs on the Titanic but the lets examine the results more closely.

Your existing monthly Mortgage repayment is $1,705 per month, your car loan $445 and the minimum repayment on the credit cards is about $500 per month, so the total repayments per month is $2,650. Now if we consolidate all these loans as a new mortgage the new mortgage amount required will be about $295,000. To this let’s add another $2,000 to pay for any costs things like paying out the old loans early or loan set up costs, this gives us a new mortgage amount of $297,000. The repayment for this new mortgage will be $2,026 per month, that’s a monthly saving on the old total of $624 or $144 per week, and remember this is done with out any out of pocket expenses from you to make it happen, that was what the $2,000 extra was for, the new loan literally pays for itself.

Now we all know there is no such thing as a free lunch and with this new financial structure in place we have a larger mortgage and a larger monthly home loan repayment to make. The new repayment of $2,026 is $321 per month higher than the old mortgage used in the example, we no longer have the car loan or any credit card debt to worry about. You now have one simple repayment to make each month, you also have $624 per month extra in your purse or wallet even after the extra mortgage repayment, so it becomes easier for you to budget.

There are no more worries about late or missed repayments, and you get a fresh start.

Another benefit of this type of arrangement is because you are now paying much less than you were the old way you might even want to pay off a little extra on your home loan. If we use our example again and pay as little as an extra $30 per week on to the mortgage you can reduce the time needed to pay off the loan by over 5 years and save over $91,000 in loan interest.

If this sounds like an answer for you please call me now, we can help get this started for you now.

2. The second way to help reduce your mortgage repayment burden may be as simple as reducing your mortgage interest rate. With so many lenders in the mortgage market today there is a good chance that there are better interest rates out there that we can help you find. This of course depends on your current situation and the better your repayment track record the better the interest rate you will qualify for. But regardless of your situation, Mortgage Power Australia are not here to judge you, we are here to help you. Just about everyone has been in tight spots financially, the thing that’s important is being able to work through these challenges, you don’t have to do it on your own we want to help.

3. Another method we use to help reduce your mortgage repayments even more is to set up an interest only mortgage for you. As the name suggests this type of mortgage only requires you to make interest payments and not reduce the mortgage principal or balance. This has a very positive effect on your cash flow but I must stress that this type of loan should only be used as a short term measure usually for less than three years. The reason being with this type of repayment strategy you never reduce your mortgage principal. If we use our example from before the normal or principal and interest repayment on $297,000 at an interest rate of 7.25% over 30 years is $2,026 per month, the exact same loan with the same interest rate with an interest only repayment works out at $1,794  or $232 less per month. Once again this style of repayment is only recommended for short term use on you home loan. Though we understand there maybe times where this minimum repayment method may make a big difference. Once again if you feel this sort of solution may be what you need please call or leave me a message, I will get back to you as soon as I can.

4. Another simple way that refinancing your home loan can help is that with the new loan the clock gets reset, the loan term can be extended out to the maximum term and reduce your mortgage repayments to a minimum. If we use our example again and compare a loan with 22 years left to run compare with a new 30 year loan the repayment on the same amount can be reduce by $188 per month and remember all the loan set up costs can be factored into a new loan so you don’t need any cash to get things started.

As I mentioned earlier with mortgage interest rates going up on top of high fuel prices a little extra cash every week can make a huge difference, for some of our clients it has been the difference between being able to keep their home (and their sanity) or loosing it.

I think of these types of situations as like being sick, sometimes to get over an illness we need to take special measures to get well and be back on your feet again. The exact same thing is true of finance and money, don’t wait until it’s too late, it is much easier to fix a problem early than it is later on.

You may be able to improve your current situation and your cash flow by adopting one or more of these strategies, if you have a steady income and want to get on top of your financial situation before it gets on top of you, please give us a call, we won’t judge you or make you feel embarrassed we only want to help you through a rough patch. We are not the bank, we are people just like you.