It is impossible to know how much interest rates will rise, but one thing we know for certain is that they are rising…
It is important to look at your budget and financial situation, so you can plan for the increase in your budget.
If you are worried about the extent of interest rate rises, keep in mind that all increases are introduced gradually. The most important thing to do is get prepared. How can borrowers prepare themselves for the increases in mortgage rates?
Tips to Manage Higher Mortgage Repayments
Here are some tips to help ensure that you can stay on top of your repayments:
Tip 1: Review your mortgage pronto
If you have a home loan bit haven’t checked out the details in the last 12 months, now is the time to do so. You could be paying more than you need to. Did you know, for instance, that many banks will offer new customers a lower interest rate than existing customers? Check out your current rate and see what you are paying. Then…
Tip 2: Contact your bank
Make sure that you are not paying too much by checking the interest rate that you are paying with the interest rate that the bank offers new customers. Then call them and ask for a discount. Tell them that you are thinking of refinancing, and you would like to know if they are willing to offer you a discount to stay with them. They could say no, or they may shave off some of your repayment, gibing you an instant saving.
Bonus tip: If you do secure an interest rate discount and your repayments go down, set up a direct transfer of the difference into a separate bank account that you do not touch. If you let that money build up over time, you can use it towards your repayments when they increase. Or simply leave the direct debt instalments as it is and leave the extra money in your mortgage.
Tip 3: Review the market
Whether your bank agrees to a discount or not, have a quick look around at other deals that are available. This is where a mortgage broker may be able to help. We look at your situation and review the market for you, then come back to you with the best offers and deals to suit your needs. Shopping around could see you save hundreds or even thousands of dollars a year on your home loan.
Tip 4: Look for cash-back deals
Many lenders offer cash-back deals when they approve you for a loan. There are a few fees and charged involved when you refinance, but if you find a loan that suits your needs and it offers cash-back, you could bank $2,000 to $2,500 from your refinance. Set this money aside in a bank account you don’t touch or consider making an extra repayment in your variable-rate home loan now and you will instantly make a saving on interest.
Tip 5: Start saving
Interest rates are going up and your mortgage repayments will go up with them. Look at your budget to find ways to set aside the extra money for the expected increases now. This way you will be able to afford the repayments when interest rates rise, and you will build up a small nest egg to help you deal with the increase in rates.
If you calculate your future repayments and realise you might have trouble making repayments at the higher amount, it is a good idea to reach out to an experienced mortgage broker. They can look at your overall situation and potentially restructure your debt, so that you don’t get into financial stress down the track.
Phone: 1300 855 022
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Connect with Louisa on Linkedin.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether in business, health or financial.