It’s no secret that tens of thousands of Australians are struggling to meet mortgage repayments. Increasing interest rates coupled with wages stagnating is leading to financial hardship for many people throughout the country.
However, there are always solutions and avenues to explore.
If your financial difficulties are the result of an accident or unemployment, you should speak to your lender immediately. Banks often have options in place for their borrowers should life get in the way.
If your issues are stemming from poor management, you should still let your bank know what’s going on. The sooner you tell them, the sooner the bank can step in and help you get back on track.
In addition to seeking guidance from your lender, there are a number of options to address your individual situation.
Option 1: Reduce your home loan repayments
Even if the interest rates drop, your mortgage repayments will often remain the same. It’s fantastic that you’re paying more than the minimum repayments, however, you could be using this extra money to pay down other debts or to give yourself some breathing room.
Make sure you ask your bank whether you are in fact paying the minimum repayments. If you’re paying extra, ask them to adjust your payments accordingly and make use of that money to relieve some stress.
Option 2: Consolidate your debts
If you have a mortgage, a car loan, and a credit card debt with three different interest rates, you’re haemorrhaging money that could be used to pay them down.
For example, if your personal loan has an interest rate of 12.1% and your credit card debt has an interest rate of 19%, it makes so much more sense to cancel the card and roll the debt over into your personal loan. You’re saving so much money you would’ve spent on interest that you can now use to pay down this consolidated debt.
Many banks are willing to do this for customers provided they come in and discuss payment plans and are honest about their situation.
Option 3: Utilise the Snowball Effect
The Snowball Effect is a fantastic financial tip that is very simple to follow. First things first, you make sure you’re only paying the minimum repayments on each of your debts. Then you select the smallest debt and focus all your energies on paying it off. Rather than distributing your money equally between your debts, pay everything you can into one to have it paid off faster.
This technique not only reduces the number of things you’re paying off, but it also reduces how much you are paying in interest as the debts are paid faster. Ultimately, you’re going to feel like you’re accomplishing things and you’ll be encouraged to keep going.
Option 4: Access your redraw
If you’ve been making more than minimum repayments for a while, you should have a sum of money available to you via redraw. By withdrawing this to pay down smaller debts or financial emergencies, you’re giving yourself a little bit of room to breathe.
Option 5: Sell one of your investment properties
If you own multiple properties and are now in arrears, it makes sense to look at selling one of your properties to get out of debt. This is obviously not a desirable solution for most people. However, it’s better to remain in control of your debt rather than ruin your credit rating and have the banks chasing you for money.
If left with no other option, Hutton & Hutton can help. We can put your property on the market and have it sold as quickly as possible. Therefore, you’ll be able to use the money to get yourself out of a sticky situation a lot faster.