15 April 2008
Mortgage financing has caused many people great financial difficulty in the past year or so, as interest rates have risen to a point that is unsustainable for many Australian families. If you aren't feeling the pressure too much yet, then you may be able to give yourself some room to move by considering a few strategies to improve your mortgage financing payments.
Refinance the mortgage
Mortgage financing can sometimes get out of control because you selected the wrong extra facilities to begin with. You may have included elements that you've subsequently found provide little use, and perhaps neglected to choose a redraw facility or offset account. Both of those last options can allow you to keep the most amount of your mortgage financing paid off at any particular time. If you don't already have either of those features, then you may wish to refinance your mortgage to benefit from being able to put as much money into your mortgage as possible.
Use the right credit card
The credit card that will give you the most advantage on your mortgage financing may not necessarily be the one with the cheapest fee or the lowest interest rate. If you choose a card with many interest free days, and you never spend more than you can repay per month, then you would be better off paying slightly more for a rewards program or other benefit rather than paying for a reduced interest rate that never applies to your spending. Reward points can be gained from many purchases, depending on the rewards program your card is a part of, and may be able to gain points from your weekly grocery shopping alone. If you choose a credit card that gives one reward point per dollar spent, and shop somewhere that gives you reward points on your purchases, then you may be able to earn 10,000 points or more per year just through normal spending.
Additionally, if you use a redraw facility or offset account on your mortgage financing, then you can spend using your credit card, and then merely repay it entirely before the interest free period expires in order to greatly reduce the amount of interest that accumulates on your home loan.
Consider whether your savings are sound
If you are saving money in another account rather than putting it all into your repayment of your mortgage financing, are you sure this is beneficial? It is highly unlikely the interest you gain each day on your savings is greater than that accruing on your home loan. If you merely save for emergency funding, then you may be better off refinancing to include a redraw facility, and merely repay ahead of your minimum repayment schedule rather than dump funds into a savings account.
Please visit our home loans page for a selection of lenders offering excellent mortgage financing.
Mortgage Financing