With the property market starting to recover, deferrals are also beginning to recuperate too. In fact, 81% of all mortgage deferrals from June 2020 are again starting to move in the right direction. However, despite such good news, 82,000 Australians have still deferred their mortgage repayments.
With the JobKeeper scheme finishing on the 28th March 2021, thousands of homeowners may have to make some tough choices by Autumn. If you think that you will struggle with paying off your mortgage due to changes in circumstances, read on to understand the basics of mortgage repayments and how a different type of loan may be what you need.
How Much Of Your Income Should Be Allocated To Your Mortgage?
Date collected from the Australian Bureau of Statistics in 2016 showed that the average Australian spends $1,755 each month on a mortgage that’s worth $453,133. The data also showed that the average mortgage payment in New South Wales was $1,986 per month, and in Victoria it was $1,728 per month.
It is recommended that you ensure you have enough finance to be able to pay for both your home as well as any other financial obligations. As a homeowner, you should also preferably be able to save at the same time. For this reason, it is therefore critical that homeowners pay the same consistent figure when it comes to mortgage repayments.
Those who are below the 30% mark of their total monthly salary are the most preferred by lenders. Data compiled by the ABS in May 2020 shows that the average weekly income for a full-time worker in Australia is $1,714. This equals an average monthly income of $6,856. Using these figures, we can estimate how much the average full-time worker would need to spend each month to be favoured by lenders. If aiming for 28%, the average worker would aim to spend $1,919 per month ($6,856 x 0.28), and for 30% it would be $2,056 ($6,856 x 0.3).
In reality, however, everyone has different circumstances, and there will be those who can allocate more of their monthly income towards their mortgage without breaking the bank. If Refinancing has crossed your mind, then now may be the best time to take advantage with the interest rates being so low.
It is important to stay ahead of your payments. With our Mortgage Loan Repayments Calculator, you can get a good indication of how long you will need in order to pay off your loan.
How To Increase Your Odds Of Paying Your Mortgage Off Quicker
There are many ways to increase the control you have over your mortgage. Here are some of these ways.
Speak to a Broker
There is only so much you can do by yourself. By getting in touch with a broker, you can learn several new ways to improve your mortgage situation. From lowering payments to altering the terms of your loan, there are lots of options to explore.
Assess your Expenses
Reducing unnecessary spending and reviewing your current budget are great ways to keep mortgage payments in check. You may need to make drastic changes, however in general, most homeowners will always have a few outlays that can be reduced.
One way to considerably reduce your monthly payments is to only pay interest on your loan. This is not generally recommended as it can increase costs in the long-term, however could be a clever strategy for the short-term.
In this instance, you will pay interest on your loan over a pre-defined period of time. These terms would need to be reviewed and settled between yourself and your lender. After this period, your loan will switch to a principal and interest loan. Before agreeing to this, you need to make sure that you will be able to pay the repayments by the end of the term. If you are considering an adjustment to your type of repayment, then you should consult with your financial advisor or accountant.
Another way to reduce your mortgage payments is by refinancing to a new interest rate. Whilst there may be fees involved as well as needing to meet a specific credit criteria threshold, it is a good option if you want to spend less towards your property. By working with your mortgage broker, you can find out the best rate whilst taking into consideration your own circumstances.
By consolidating your debts, you will have all of your debts managed together in one place. As well as only having to make one monthly payment instead of several, it could also lower the overall interest you pay each month. Although there are benefits to this, there are also drawbacks. By consolidating debt into a home loan, which is usually longer than other credit terms, you may end up being charged more over the long run. Therefore it is important to think this through fully before committing.
It is important to consider your own wants before committing to any significant changes. Everyone will have different financial goals, therefore it is important to reflect on how such changes will impact how you live, and also how much you can allocate each month towards your living expenses and savings.
Finhub Solutions: Dependable Mortgage Brokers You Can Trust
The key to staying ahead is to actively plan your monthly mortgage payments. Because most homeowners cannot always plan ahead, they end up learning the hard way. It is also important to consider what might happen in the future. Major events such as job loss, a new baby, and an unexpected illness can unwind even the best of plans. Whilst it is impossible to consider every potential outcome, it is important to consider how well you could manage if some of these events were to occur.
Choosing the right home loan for you will mostly depend on what you can pay each month. This may be lifetime payments, or in other cases you may consider and prioritize the short-term until you can get back to a more stable position.
Do you have any questions regarding how to plan? Here at Finhub Solutions, our team of mortgage brokers in Sydney are here to help. As well as looking at the above factors, we will also explore your own individual options. Our mission is to help everyone afford their own property, regardless of what may happen with the economy. Get in touch with us today to see how we can help