Owning your own home can be a great step along the path to financial freedom, but it can also be a serious burden if you aren’t cautious. A mortgage can be a heavy weight on your finances, if you either purchase a home that you can’t quite afford, or you find yourself locked within unfavourable loan terms. Fortunately, if you think that your mortgage is too expensive, Home Loan Cash Back can help. Our mortgage brokers can help you to assess your current lending circumstances and find a loan that’s more appealing to you. On top of that, when you work with us, you get access to cash back from your home loan every month! So, how can you tell if you’re paying too much for your mortgage?
1. You’re Struggling to Make Ends Meet
If, no matter what you do, you feel like you can’t quite make ends meet, then this could be a sign that you’re paying too much for your mortgage. Though your home loan can be one of the most expensive debts you ever commit yourself to, it shouldn’t be so overwhelming that you find yourself struggling to pay for food and other bills. If you’re struggling to get ahead of your payments, it may be time to re-finance, or consider your options.
2. Your Home Loan Repayments Eat Up more than 30% of your Income
Most financial experts advise that homeowners should avoid spending any more than 30% of their overall income on housing. The reason for this number is that for most people, if you keep your payments below this level, you will be able to live comfortably, without constantly worrying about money. Even if you can make your mortgage payments comfortably, but you’re spending more than 30% of your income on them, it might be time to re-assess the market and see what other options are available to you.
3. Your Interest Rate is Higher than Most
Sometimes, it can be difficult to tell that you’re struggling with a bad interest rate, until you start comparing your payments with friends and family. It can be quite easy to get yourself a mortgage, make payments, and not worry about how the interest rates are moving up and down, but you should never allow yourself to get locked into a rate that’s higher than necessary. If you bought your home quite a while ago, there’s a good chance that you could access a far smaller interest rate by simply looking at the market.
4. You’re not Making a Dent in your Principal
Perhaps you’ve been making home loan payments for a number of years now, yet every time you glance at your account statement, it seems as though your principal is staying the same. It’s normal for some people to pay mostly interest when they’re getting a loan, but over time, you should be making a significant dent in the money that you originally borrowed. If you find that you’re not paying off your loan as quickly as you’d like, it’s time to start shopping around.
5. Your Credit Score Has Improved
When you apply for a home loan, you’ll find that your lender takes several different things into account, including your income and your credit score. That means that if your credit score has improved since you originally got your loan, or your income has gone up, then you could be able to refinance your home loan into a shorter term, therefore saving yourself some money on interest over the long-run.
Don’t Pay Over the Odds for your Mortgage
If you’ve noticed any of these five signs that you’re paying too much for your mortgage, make sure that you take steps to reduce your payments immediately. The quicker you start cutting down the amount of interest you have to pay, the quicker you can benefit from easier repayments and less pressure when it comes to paying off your loan!
