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How to Unlock Yourself from Your “Mortgage Prison”

The term “mortgage prisoner” has recently gained traction, describing those mortgage holders literally under siege by their home loan and falling into the category of being under “mortgage stress”. It’s typically thought that home owners who spend more than 30% of their income on mortgage repayments are under mortgage stress with this figure currently representing around a third of Australian households.

For those who cannot refinance to a better rate due to low equity or not passing the servicing metrics now imposed by lenders, hope is not lost. There are still strategies you can implement to ease your financial burden, manage your money more effectively and pay off your debt quicker.

Review Your Loan with Your Mortgage Broker

Even if you have approached your bank yourself, it pays to talk to your mortgage broker to see what options are available to you. Your broker may be able to obtain additional interest rate discounts from your lender, leveraging off their own relationship with them and acting as your advocate.

If you are unable to refinance to another lender there is always the option to do a product swap with your current bank if there is a more competitive option available, for instance changing to a fixed rate loan from a variable if the rate is lower.

There is potential to save interest and pay down your debt by simple tweaks in your current arrangements. Ask your broker how.

Review All Expenses and Negotiate Better Deals

It’s not just on your mortgage that you have the capacity to negotiate more favourable terms. Whether it be your insurance providers, utility or telecommunication companies, approach them to either ask for a better deal or change your plan or arrangements. If you are successful in getting a cheaper deal with a current or new provider, direct those savings straight into your home loan to reduce your debt.

Use Your Offset Account Effectively

If you are not already doing so, make sure you are effectively making use of your offset account to ensure your money is working harder for you. Have your income paid into your offset, leave it sitting there for as long as possible and use your credit card for monthly purchases, clearing the card before the interest charges are incurred.

If your lender offers multiple offsets and you have several transactional accounts, ensure all are offset accounts that are linked to your mortgage.

Effective management of an offset account can see your principal balance reduce quicker to increase your equity position.

Set a Budget and Stick to It

By reviewing your expenditure, you may be surprised how little changes may reap large rewards. If you spend five dollars a day on takeaway coffee during your work week that’s more than $200 per year. Identifying areas of expenditure such as this that can be adjusted may be a great way of “finding” extra money that can be directed into your loan to pay down debt.

Having a plan in place and sticking to it is key along with reviewing it at regular intervals. You can even increase your mortgage repayment amount by what you expect to save so you know your debt position will benefit from your adjustments automatically.

Having a plan in place and taking advantage of all the options available to help you save money and pay down your dent is key to helping you move forward and unlocking yourself from a “mortgage prison”. Your mortgage broker should be the first port of call to point you in the right direction.

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Take control of your finances and start paying less on your mortgage today. With our no cost, no obligation review of your existing loan, our expert mortgage brokers will analyse your current loan and provide you with a tailored solution to help you save on interest and pay your loan off quicker.

Paul Prindiville


0438 196 695