You’re not alone if you are concerned about the impact of rising interest rates / rising mortgage payments, it’s one of the main stress points for Aussie’s right now.
One thing economists seem consistent on right now is that interest rates are likely to further rise and until inflation is under control that is likely to continue to happen. Things will correct at some point, the problem is we just don’t know exactly when so the best action you can take right now is to get a good handle on your situation and make sure you are well prepared to weather the further rate rises.
Here are my top 10 tips:
1. Do your research
- Do you research and see what rates are available and check if your current mortgage rate is competitive. You can look at website such as canstar and finder to check what rates are on offer.
2. Get the best deal
- Start with your current loan provider and contact them for a better rate.
- Make the call today and say something like this:
‘I’m reviewing my current home loan and considering switching to another provider as I have noticed other banks are offering much better interest rates than I’m receiving (feel free to quote a bank and a rate from your research), can you offer me a more competitive rate to stay?
Here’s something you should know. Institutions usually offer new customers a better rate than existing, I hard stern words with my own bank about this. I was able to shave 0.6% off my current rate though and am weighing up if I will refinance all together. You should do the same.
3. Consider refinancing
- Talk to a reputable mortgage broker and ask them to review your loan (reach out if you need a contact).
- Make sure you are clear on what your goals are and what features and flexibility you want with a loan (e.g offset accounts), and
- Make sure you get a detailed comparison of all fees (establishment, ongoing, exit etc) before making a decision.
4. Weigh up Fixed v Variable rates (carefully)
- Fixed rates can provide certainty in terms of repayments however the current fixed rates are quite a bit higher than variable with many institutions. So make sure you think through this one carefully and ask your mortgage broker to provide some projections for you on the different options.
- Make sure you also understand the terms and conditions around fixed options and if these suit your goals and plans.
- You might be able to consider a split between fixed and variable depending on your circumstances and what’s on offer. But locking everything in to fixed in the short term could be restrictive and potentially more costly.
5. Use your savings to reduce interest
- Have you got savings that you could use to offset your loan?
- Usually interest on loans is higher than interest earning on savings/bank accounts so if you have an offset and then you should consider parking your savings in there to make sure your money is working as hard as possible for you and reducing the interest on your mortgage.
6. Pay fortnightly
- If you can switch your mortgage repayments from monthly to fortnightly and pay HALF your current monthly repayment each fortnight you will get a month ahead on your mortgage, without too much impact on your budget. (because there are 24 half payments and 26 fortnights, so you will sneak in another 2 fortnights worth of payments without hopefully noticing too much impact)
7. Don’t wait for the increase
- Start paying your mortgage as if we’ve already had a further 2% rise!!!
- To work this out, jump on to the Moneysmart.gov.au website and plug your numbers into their mortgage calculator.
- Get used to paying a higher amount now and you will also get further ahead building a nice buffer in the loan. (Note: if you’re on fixed rate and can’t do this, start saving this now and be ready to pay it down when the fixed term ends).
8. Pay Extra
- It might seem like a no brainer, but pay extra however you can.
- If could be, bonuses, tax returns, surplus income….wherever you have extra cash put it on your mortgage if you can. This will start reducing your interest payable straight away and save you in the long term.
10. Get your financial house in order
- Taking control of your overall financial situation will put you in the best stead possible.
- Knowing ALL your numbers, reviewing your spending plan, any other debts, making sure you have worst case planning sorted (insurances, emergency funds, estate planning) and that you are really clear on your goals and the direction you are heading will put you in a position of power and in control of your financial future!
The Moneymode School next round will start late 2023…jump on the waitlist for a very special offer. This program will give you all the tools to build your own financial plan (at a fraction of the cost of working 1:1 with an Adviser AND you’ll get 6 months of mentoring, from me. JUMP ON THE WAITLIST HERE
Money Mode Advice Pty Ltd (ABN 29 627 492 791) is a corporate authorised representative of Integrity Financial Planners Pty Ltd (AFSL 225051, ABN 71 069 537 855)
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This presentation provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.