Use your mortgage to your advantage
In strange economic times like these, having a large mortgage can seem daunting. Nonetheless, there are various resources, tips and tricks available that can make your mortgage work better for you – whether you’re having trouble making your payments or you have surplus cash to spend.
Consider mortgage relief
As a relief from Coronavirus woes, banks across New Zealand are offering cash-strapped homeowners the ability to defer their mortgage payments for up to 6 months. In most cases, you’ll still accrue interest… but with rates hovering around and even below 3% p.a., this might as well equate to a low-interest loan.
This could be a life-saver if you can’t afford your mortgage payments. And even if you can squeak by with your normal mortgage payments, it’s worth considering deferment – but only if you’re eligible for it and you can put the cash to better use.
Of course, we’d never advise taking advantage of such a situation only to blow the extra cash on nonsensical endeavours.
Take advantage of revolving credit
A revolving credit home loan is one in which you have an open line of credit equal to the equity you have in your home. If you have one of these loans and you can put the money to good use, it may be worth tapping into any equity you have.
For example you could use it to pay off higher-interest credit cards or personal loans.
Again, just don’t blow the money.
Make extra payments
On the other end of the spectrum, you can trick yourself into paying your mortgage off faster by paying your mortgage fortnightly rather than monthly. For simplicity’s sake, let’s say you usually pay $500 a month toward your mortgage. That’s 12 payments equaling $6k (whether that’s applied toward interest and/or principle is beside the point in this example).
If you decided to pay fortnightly instead, and treated those “bifurcated” payments as half the value of the original monthly payment, you’d end up paying your mortgage off faster.
That’s because there are slightly more than 26 fortnights in a typical year., or an extra month’s worth of repayments.
You can do something similar by applying any unexpected windfalls toward your mortgage.
Bottom line
The silver lining to the current economic situation is that governments, institutions and people have recognised the common threat and have provided ways for people to survive and maybe even thrive through the pandemic.
If you have a mortgage or are thinking of getting one, you’ll have access to one of the major levers of the current economic stimulus.
The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.
