Here are six rules on how to successfully manage a mortgage:
1. You determine the timeframe. An easy pitfall with a mortgage is accepting the initial term set out by your lender, typically 25 or 30 years.
You need an understanding of how quickly you can pay the mortgage off and this will be determined by your income and your spending. Once you have identified this you will find your timeframe will be much shorter than the default term.
2. Have a flexible structure. Your mortgage structure needs to be flexible enough to allow you to make extra repayments and redraw money if needed. Fixed loans and standard table mortgages will often not allow you to do this, so it is important to have at least part of the mortgage that does allow you this flexibility.
3. Protect it. There is little point in putting a plan together that will get you out of debt as quickly as possible if you do not have an appropriate level of insurance to protect you if you get sick and/or are unable to work.
4. Utilise your income. A working couple will have anywhere from $5000 to $10,000 of income a month going through their bank accounts, utilise this income to offset a large portion of your mortgage interest cost.
5. Monitor it. Very few plans work perfectly, and to manage your mortgage properly you need to be able to monitor your progress and identify when you are going well and when you are doing poorly.
6. Update it. Circumstances in your life will change, incomes may go up, children will be born, careers may alter. As these change, your plan will need to be updated and adjusted.
- © Fairfax NZ News
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