Australian Property News
Become mortgage-free faster in 2010
Posted on Tuesday, January 19 2010 at 10:09 AM
To begin 2010 a little closer to being mortgage-free, there are five steps investors need to take, according to Mortgage Choice.
The first step is to look at the market – compare the interest rate to other lenders' rates and determine what's fair and necessary where fees and features are concerned.
The second step is to work out if it's possible to contribute extra to the loan by paying fortnightly instead of monthly, or making the loan a partial offset.
The third step is to repay the mortgage as if its interest rate was two percentage points higher. This would prepare the investor for the moment there was a rate rise and would also encourage a good savings habit.
The fourth step is if repayments have been a struggle, to consider refinancing over a longer term, or if the investor had been making extra repayments to reduce the loan faster, refinance the loan so the repayments reflect what is owed on the loan rather than the original amount.
And the fifth step is to analyse spending habits. List expenses and work out where expenses can be cut so more can be contributed to the mortgage.
Editor of Australian Property Investor magazine Eynas Brodie says with the general expectation that interest rates will continue to rise this year, now is as good a time as any for borrowers to review their mortgage.
"Mortgages are one of those things in life that become like a habit," she says. "Every fortnight or every month we make our repayments, but how often do we take time to check that we’re still getting the best deal or making as much headway as we potentially could be?"
"For borrowers, especially those with multiple mortgages, it's important to periodically give your borrowings a health check and see if there are savings to be made and if you can reduce the life of your loan," she says. "Alternatively, if you're struggling financially, refinancing the loan and extending the term of the loan may just give you the relief you need."
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