After the success of our Tips for mortgage holders affected by Queensland & Victorian Floods article earlier this week, we asked Mortgage Choice for more general tips for business owners looking to get their mortgages under control and free up working capital for your business in 2011.
Step 1: What bang are you getting for your buck?
Financial circumstances and lifestyles change, as do your needs. Consider how competitive your lender’s interest rate is, what features you are paying for and aren’t using or don’t have and need, the fees you’re forking out and the cost vs. benefit equation for switching loans and/or lender.
Step 2: Can your mortgage work better for you?
Are you throwing lump sums into the loan account when possible e.g. your tax return, bonus or leftover wage? Every cent counts in helping to reduce the interest owed and the loan term. Plus, contributing more when you can helps build a financial buffer for times of need.
Step 3: Are you repaying at a higher rate?
Have you been repaying your mortgage as though its interest rate was at least two percentage points higher, preparing yourself for rate rises and unexpected financial changes? This will encourage a good savings habit and make adjusting to increased living costs and interest rates less burdensome.
Step 4: Still struggling with repayments?
Consider repayment reduction strategies such as extending your loan term or debt consolidation. Keep in mind this will stretch your debt over a longer period, attracting interest with every extra month. You’ll need to weigh up the financial and emotional pros and cons beforehand.
Step 5: Are you spent?
Are you spending more money than necessary on transport, entertainment, takeaway food and other luxuries? Continually list your expenses to discover savings. Once you’ve revisited all of the above steps, re-do your budget so you really are beginning the year confidently ahead.