Holidays and hobbies make life enjoyable but few things affect lifestyle as much as where we live.
Buying a home is one of the biggest investments most people make and mortgage repayments are among the biggest costs. But the expense of a home loan doesn't have to rule out life's other luxuries. With a bit of forward thinking, some wise decisions and by making the most of what's on offer, you can have it all (or at least more than you think).
1. Add it up
Before you leap into buying property, remember the purchase price isn't the only cost. Stamp duty, legal charges, inspection reports and removalist fees can add up to thousands. Those extras can be added to your mortgage but be sure to factor them in to what you can afford. It's also wise to build in a buffer so you're not under stress if interest rates rise.
2. Add a little bit extra
The size of your mortgage can be daunting (it’s probably going to be the largest debt you’ll ever have) but it’s important to keep it in perspective. If you’ve followed step 1 and been realistic about what you can afford to borrow, those fortnightly or monthly repayments shouldn’t be scary.
But because that mortgage debt doesn’t come with any tax benefits, paying it off should be a priority. Adding just a little bit extra to your repayments whenever you can (for example, after a pay rise or tax return) can make all the difference to the length of your mortgage term.
3. Plan ahead
List the purchases and improvements you'd like to make to your new home and budget for how much they'll cost. Consider other expenses too – are you planning a holiday or buying a car? Some things can't wait but prioritise other expenses considering your cash flow.
Take advantage of the features your mortgage offers. Using an offset account, for example, could save you hundreds of dollars a year in interest.
4. Lock it in
If you want to be sure of what your repayments will be, a fixed rate mortgage will give you the certainty you need. Mortgage interest rates may be low now, however this may change depending on economic conditions.
Getting a new mortgage – or refinancing an existing one – is a good time to review all of your service providers. Shop around for a better rate on credit cards, energy bills and insurance. The difference between the highest and lowest cost providers can run to hundreds.
Mortgages often include credit cards with discount rates or premium perks. Consider whether these would be suitable for you. Also think about consolidating debts into your home loan. Interest rates on personal loans and credit card balances can be much higher than mortgage rates. The downside is you'll be stretching the cost over the life of the loan.
If you've had your mortgage for a few years, check if better deals are available and that the loan you have still suits your needs.
6. Bells and whistles
Take advantage of the features your mortgage offers. Using an offset account, for example, could save you hundreds of dollars a year in interest. Cash held in an offset account acts as if you'd paid the amount directly off your mortgage. Because interest is charged daily, every dollar offsetting the loan balance is a saving.
Holding $5,000 in an offset account could save $250 a year on a loan that charges five per cent interest. That may not sound like much, but it would pay for a lavish meal or two.
7. Claim what's yours
Government grants and duty exemptions are available for some home buyers. Contact your state's revenue office to see if you're eligible. Spend reward points on credit cards and loyalty programs, save money on petrol using shopper dockets and look out for special offers. Some local councils and utility companies offer free or cheap energy saving devices and audits. Those can help cut your power and water bills, keeping money in your pocket for life's little luxuries.