If you have a home loan, your repayments may be one of the biggest expenses in your budget.

You might have heard general advice about setting yours to a level that’s manageable, so you can possibly clear the loan more quickly and save  money in the long run.

But what does this really mean?

What’s a manageable mortgage repayment?

Lenders calculate the required repayment amount, based on the interest rate and term of your home loan.

If you’re paying off principal and interest, this will be set at a level that clears the loan in the time you have agreed to repay it.

You do not have to just pay this minimum payment, though. Paying more than the minimum helps many households clear their loans sooner and this reduces the interest they need to pay overtime – saving them money. However, lenders can have different rules about additional repayments and depending on the type of loan you have, they may charge early repayment fees. Your SHARE adviser can help you understand the terms and conditions of your particular loan.

To make additional payments, you need to know what is manageable for you. What level of repayment could you make while still covering your other essential bills? What level of repayment would still allow you to put some money aside for savings or unexpected expenses?

There is no single answer for this. What is manageable for your household will depend on what you earn, what your commitments are and where your financial priorities lie.

On the flip side, if the minimum required repayment is no longer manageable for you, then it’s time to take urgent action. Get in touch with your SHARE adviser or lender to talk through what options could be available.

Repayments have a wider impact

Since your mortgage repayment can represent a significant proportion of your household budget, it can have an impact on the rest of your financial life.

While you might consider setting your repayments as high as you can afford, to clear your debt more quickly, that may not make sense if it becomes difficult to meet your other financial obligations.

When you’re setting your repayments, it is often a good idea to have some leeway in your budget so that there is room to cope with unforeseen challenges.

It’s important that your repayment is relatively comfortable and sustainable for your household so that you can stick with it.

Sometimes, if it is likely that a household will only be able to make a higher repayment for a short period of time, or that the affordable repayment amount might vary, a home loan structure that could accommodate this is preferrable. In these circumstances, options such as a revolving credit facility may be considered. This also may be a suitable option for borrowers for whom a fixed higher repayment is too rigid. Your SHARE adviser can recommend a loan structure most suitable for your needs and goals.

Life can change

Many of us have home loans over a long period and it’s common for life to change a lot during that time.

If you have a home loan on a fixed rate term, as it comes up for refixing, it’s a chance to look at whether the repayment level you’ve previously set is still right for you. Potentially you could get advice about adjusting. Our advisers will take into consideration what interest rates are doing and how your budget looks before presenting a recommended course of action for you to consider.

If you’ve been paying a higher repayment and no longer want to do so, we can help you to look at whether reducing it is a possibility and a suitable option for you.

We can also help you to look at your overall mortgage strategy and ensure it remains fit for purpose.

Advice helps

When you’re working with a SHARE adviser, you have an experienced professional on your side to help assess your options and keep you on track. We can help you look at your goals and determine how they will work with the reality of your individual situation.

If you’d like to chat about whether there are tweaks you could make to your mortgage strategy to get better results, get in touch with the SHARE team. We’re here to help.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.