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Managing your mortgage includes the repayments and understanding your loan conditions. To avoid costly penalties and stay on the path to paying off your home loan here are some tips that will help you manage your mortgage more effectively.

1. Set a budget.
Managing your finance starts with managing your budget. Firstly, have a look at how much money comes into your household every month. From there, you can decide how much money you’ll have to set aside for your repayments. You may have to juggle your budget if it’s already tight. You can do this by looking at regular non-essential expenses that you could do without. None of us like hear what these non-essential costs are because they are usually things that make life interesting. We wont tell you what you can cut back on but you might like to think about the long term and how that extra money could be used.

2. Cut your debt.
There is good debt and bad debt. Good debts are things like your mortgage because you’re taking on that debt in order to have a home or an investment property that hopefully will make you money when you sell. Bad debts are debts you take on that don’t really add value to your finances or life as a whole. These may include impulse purchases that you bought with your credit card, which usually aren’t essential items or items you could have saved for.

It’s essential that you cut these bad debts as soon as possible. With debt out of the way, you’ll be able to free up more of your finances so you can pay off more of your mortgage and save up for other important things such as your retirement and your children’s education.

3. Pay more than the minimum, if possible.
Speaking of cutting your debt, you can reduce your mortgage significantly if are in a position to pay more than the minimum repayments. Paying even $100 extra per month will eventually add up and may cut off months’ or even years’ worth of repayments from your mortgage.

It is important to remember, however, to ensure your home loan requirements allow you to make extra repayments without a charge. This is typically the case with variable rate loans and not those with fixed rates. So, before you proceed, ask your Launch Finance broker about this.

4. Set up a direct-debit for your mortgage.
Managing your finances requires discipline and if you really want to be strict about paying your mortgage on time, then setting up direct-debit makes a lot of sense. Setting up a direct debit is also a great idea to ensure you don’t forget to make payments. Often lenders will charge a fee for missed payments and that is something you certainly do not want, especially if you have the money for the repayment.

When setting up your direct debit, set a date that suits your personal circumstances. Maybe you get paid on a Monday, so Tuesday will be a good day for the repayment to come out. Direct debits are there to help make life that little bit easier, so take advantage of it.

5. Pay on time.
This is also important if you want to pay off your mortgage sooner or without having to pay more because of late payment fees, which may translate to several hundreds of dollars. If you foresee any difficulties in making on-time payments, speak with your lender right away. They may be able to provide you with other options (e.g. longer payment terms in exchange for lower interest rates) so that you can avoid penalties in the future.

6. Review your mortgage regularly
Have you reviewed your home loan in the past 10 years? If you haven’t you could be paying more than you should be.

A home loan that was great 10 years ago, may not be today or maybe your kids have since moved out, freeing some extra cash for you which you may want to put towards your mortgage, but your current home loan may not allow extra repayments. Speak to a mortgage broker about your current home loan to see if they could save you some much needed extra cash or put you on the right path to paying off your mortgage sooner.

Effective mortgage management is closely linked to managing your overall finances well. Therefore, remember to take out only what you can afford and do everything you can to pay off your mortgage and other debts as soon as possible.

One of the best ways to truly understand where you are at financially and what your ongoing costs are, is to have a comprehensive budget and stick to it. Launch Finance has developed a budgeting tool to assist you. The budget planner calculator is available to you but if you would like a hard copy simply email [email protected] .