How to Reduce Mortgage Repayments and Home Loans Despite Rising Rates
Finding out how to reduce mortgage repayments and learning how to lower mortgage rates is a hot topic of conversation in 2024. According to new research by Finder, a third of mortgage holders were struggling to manage their home loans as of January 2024. That’s the equivalent of about 1.1 million Aussie households!
As the cost of living continues to climb, a growing number of homeowners are looking for new ways to cut costs. And while depriving yourself of your daily latte is one way to do it (every little bit helps!), working to reduce loans and lower mortgage rates could deliver better results faster. After all, your home loan is likely your biggest expense.
How to Reduce Mortgage Repayments and Lower Mortgage Rates
Trying to lower mortgage rates and reduce home loans may sound great in theory, but what does this involve? Many Australians aren’t confident they know how to reduce mortgage repayments, and for good reason. Not everyone is that well-versed when it comes to finances and budgeting.
Fortunately, lowering home loans and reducing mortgage payments isn’t as difficult as some people think. Here are some simple and effective steps you can take to do this:
1. Review Your Budget and Cut Back on Non-Essential Spending
The new year is a great time to do an honest review of your financial situation. Is it possible to reduce some of your discretionary (non-essential) spending? By reducing how often you eat out, re-evaluating your monthly subscriptions, and reining in impulse buys, you may find you have more money available to pay back your mortgage. This can help reduce interest and pay your mortgage off faster.
2. Negotiate with Your Current Lender to Reduce Mortgage Repayments
If you’re worried about mortgage stress, then your next step should be negotiating with your current lender. While you can do this on your own, you’ll likely gain better results by having a broker negotiate on your behalf. Negotiating with your lender will ensure you’re not being charged “loyalty tax” and can help you access an interest rate that is market-competitive.
3. Consider Refinancing to Reduce Home Loan Repayments
If your lender isn’t willing to play ball, then it could be time for a refinance. Refinancing can give you access to lower mortgage rates, which will help reduce home loan repayments. How much could you save? Imagine you had a $500,000 loan balance with a 30-year term and an interest rate of 7.4%. Refinancing to a lower rate of 5.9% would instantly save you almost $500 per month.
4. Loan Features Can Help Reduce Your Loans Interest Charges
Another way to reduce a home loan is by making good use of loan features. By putting your savings in an offset account, you could drastically reduce your monthly interest charges. Another great feature is a redraw facility, which allows you to access any additional repayments you’ve made in the future. This means you can pay down the principal on your mortgage faster and reduce your interest, but still have access to your savings if a future need arises.
5. Extend the Loan Term and Reduce Home Loan Repayments
18% of refinancing homeowners choose to extend the length of their loan term (by an average of 3.5 years, according to Finder). This will reduce home loan repayments but will also increase the total interest you pay over the life of the loan. The short-term lower payments, however, may assist through a bumpy cash flow right now pending any future relief in sight (a new job, returning to work, etc.). Just make sure you carefully weigh up the pros and cons and get some expert advice before deciding to extend.
Ask a Broker How to Reduce Mortgage Repayments
The best way to reduce a home loan’s monthly repayments and access lower mortgage rates is to contact an experienced broker for some free advice. At North Brisbane Home Loans, we can help you understand how to reduce mortgage repayments in a way that will be beneficial for the short- and long-term. We can evaluate your home loan, negotiate with your current lender, and assess whether refinancing is the best way to lower mortgage rates and reduce your monthly repayments.
Don’t allow mortgage stress to take over your life. Book an appointment with North Brisbane Home Loans today and find out how much you could be saving.