Mortgage Payments: Guaranteed Ways to Stay on Top


Mortgage payments come in a wide range of forms. So, here are a few tips that will help you stay on top of your mortgage payments:

  1. Pay More Often Than You Have To

Here’s where we get into strategies for paying off your home loan sooner.  It’s often easier to pay smaller amounts more frequently than to work with higher payments less frequently.  Let’s face it.  We’re all tempted to use that extra buck to get something we want in the meantime, yeah?  We live according to our means.  And sometimes beyond them.  So, if you think fortnightly payments instead of monthly payments, it’s easier to make the payments.  More than that, you’ll end up making more payments annually.

  1. Pay Larger Amounts Than You Have To

Lump sum payments are great if you’ve just received a nice tax return or other lump sum benefits.  But you don’t need to wait for that.  Just think about paying another hundred dollars per month.  Or another two hundred dollars.  The more money you put in, the faster the loan will be paid off.  And the less interest you will have to pay over time.  That’s easy math.

  1. Work the Principal Down Quickly

Your mortgage payments will be highest at the beginning of the loan.  This is because the principal is highest at this time. If you stick to the minimum payments, it can seem like the principal is never paid down.  Most of your payments will go towards the interest.  This can go on for years, unless you take some innovative measures.

One of the best ways to change the game is to use lump sum payments (only available on a variable loan) via the offset account to reduce the principal as quickly as possible.  The faster the principal is paid down, the less interest you’ll pay over time.  So, by paying larger payments early in the game, you’ll be able to knock out thousands of dollars of interest over the life of the loan.

  1. Split Your Loan?

Splitting your loan means dividing your loan between fixed and variable interest rates. Variable interest rates mean that interest can fluctuate.  It will change based on rate changes of your lender or policy decisions of the RBA. With variable rates, you’re taking a chance.  They might rise, or they might fall.  With fixed rates, you know what you’re dealing with from the get-go.  You have the security of knowing what your rates will be.  But, rates may be locked in at higher levels than the current variable rates.

If you go this route, a portion of your loan will be insulated from market changes, while the other portion can gain benefits should rates drop.

  1. Keep Other Payments in Check

The key here is your credit rating.  Your credit rating has an impact on the likelihood of an approval from a lender.  The better your credit rating, the higher the chance of being approval and potentially a lower interest rate.  Late or missed payments or overdrawn bank accounts can lower your credit rating.  This makes you less eligible for loans and could make the interest rate higher for those that you do qualify for.

What does that mean?  The more you can stay on top of all your payments, the better your credit score, the better your chance of getting a loan, and the lower interest rate you’ll receive on the loan

  1. Drop the Unnecessary Expenses

Ok. Fair enough.  It’s a no-brainer.  But it still bears mention.  Most of us spend thousands or tens of thousands of dollars every year on things that we don’t need.  But a home is one of the most valuable assets we will have over the course of our lives. By prioritizing these payments, you can make sure that you have access to all these little luxuries for years to come. Think about the long run.  Don’t just play it lean when you’re saving up for your deposit.  Pay before you play and you can be in the lap of luxury for life.

These are just a few of the ways you can get ahead and stay ahead with mortgage payments.  At 1stStreet, we are dedicated to helping you on your property journey.  If you’d like a free consultation about your home loan or future investments, feel free to contact us.