Could You Be Paying Too Much on Your Mortgage?
Across Australia, thousands of people sign up to mortgages and loan agreements every year. Although they may go into the process with an open mind and good intentions – many find themselves facing financial difficulties as a result of how much they have borrowed (and furthermore, are expected to pay back).
The majority of banks will be open and honest about their rates, but unfortunately the last thing on their minds will be to make sure that the borrower still has enough cash left over after their expenses to be able to enjoy a comfortable lifestyle. Even the smallest loans can cost a lot of money each month to repay, with larger sums being even more expensive.
The first thing that a lender will do will be to look at the amount of money that you bring in each month from your job and then check to ensure that you will be able to pay back what you borrow, with your expenses taken into account. These expenses could include your utility bills, the cost of running vehicles, or anything else that the average family will be expected to pay on a monthly basis.
Unfortunately, banks will typically only check that you have enough coming in to cover what you will owe them, so if your financial situation changes and you find yourself having to pay more for expenses each month, your lender will still expect to get their money back consistently. Once you’ve signed up to a repayment agreement, you’ll have three options when struggling to meet payments.
- You might be able to re-negotiate your repayments with your bank, or have a broker do this on your behalf
- You might have to cut back on your lifestyle and necessities in order to cover the payments that you owe
- You may have to foreclose on your loan run the risk of losing your home
This begs the question ‘could you be paying a little too much on your mortgage agreement’? The only person that will know the answer to this question is you. If at the time of application, you are bringing in $3,000 a month, spend $1,500 on expenses and then have $1,500 left to cover the cost of your mortgage, you will have minimal savings until you cut back on your expenses.
You could consider reducing your fees on a personal level; perhaps you could decrease the cost of your internet package, maybe you could do without a landline, or you might even be able to start using one vehicle instead of two. The more preferable option however, would be to re-consider your repayments and think about approaching your lender with the intention of increasing your loan duration – and therefore lower what you owe each month.
Alternatively, you may have signed up at a time when interest rates were higher than they are now and this could have forced you to pay hundreds of dollars extra in the past. If you were on a fixed rate that is still active, you might well still be paying this larger sum. By evaluating your finances, you might find that you could cut back on what you spend each month – or you may simply choose to hire the services of a knowledgeable company like Mortgage Broker Melbourne to re-negotiate the terms of your payments with your bank.