How to get back on track with your mortgage repayments

By Lauren Leisk, Yahoo7 Moneyhound Updated November 14, 2012, 9:00 am

A missed a mortgage repayment? It doesn’t have to mean loosing your home.

Although it's not ideal to miss a home loan repayment, it happens sometimes and it's not the end of the world. Serious mortgage delinquencies range from 30 days to 90 days over past due dates. You still have options.

Here are some things you can do to get back on track:

Tell your lender

The first thing you must do is inform your lender if you know you're going to or have already missed a repayment. They can assess your request for an extension, so explain why you missed a repayment and how you plan to catch up.

Review your budget and look for available funds to pay back the overdue amount now, or at least manage the amount you will owe over the short term. Ensure you are realistic about what you can afford to pay back.

Your lender may recommend additional ways to help you get in front.

Related: Cash-back from your home - what is a home equity loan?

Debt consolidation

Save on mounting interest charges by consolidating debt.

Consider transferring your credit card balances to one credit card. Look for a new credit card with a balance transfer promotion rates at Moneyhound. Make the most of this 'honeymoon period' but be wary of the default rate and when it will revert to a higher amount.

You could also refinance your mortgage for a more competitive deal and lower monthly repayments. Look at the interest rate you are currently paying on your home loan and compare it with other home loans available now that interest rates have come down.

Related: How to get a better home loan deal

Change repayment frequency

Since compound interest on a loan is calculated on the daily balances, you can squash down your balance a lot faster if you make weekly or fortnightly repayments, instead of monthly repayments. Not only will you save time on your loan, but using a more frequent repayment strategy reduces your interest. Read your loan terms to ensure you won't be slapped with extra repayment fees.

Skip some expenses

Have a think about what goods and services you can forego in the next six to 12 months to pay the mortgage off instead. These aren't day-to-day expenses, but the comfort factor extras and add-ons such as pay TV, gym memberships, new clothes and excessive Christmas spending. Bear in mind that you don't have to give everything up. It's not about the dollar amount; it's about doing something and cutting back on spending where it's practical to do so.

Related: 5 Ways to take advantage of an RBA interest rate cut

Sell stuff

What can you get rid of that you really don't need anymore? Take a look in your garage and you mind find a hoard of stuff that you don't use or need anymore which you can sell easily for some quick cash. Even broken things can sell for spare parts. Consider selling old bicycles, fridges, golf clubs, luggage, skis and mirrors.

Could you downsize to one car? If you have two cars for one household you might be able to car share one. Or if you live in an inner city apartment you could consider not only selling your car and putting the money into public transport instead but also renting out your car spot for a weekly fee.

Split your bonuses

Sales commissions, tax returns and Christmas bonuses are great when you receive them. However, it's wise to put a fraction, if not half of these big windfalls directly into your mortgage.

If you continue acting and saving extra funds, you could join the majority of homeowners who are ahead on their mortgage repayments. According to the September 2012 report from the Reserve Bank of Australia, about 15 per cent of borrowers are two years or more ahead on repayments. It doesn't hurt to aim high now in a bid to reduce your current and future debt levels.

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