In Sydney, we love to talk real estate, and now we’re shifting our discussions to rising interest rates. For some, the effects of interest rate rises are immediate on household budgets, and for others, it’s now time to plan ahead for future rate rises. Darling speaks with local mortgage brokers, Nerida and Ashley from Accura Lending, who share top tips on what to do.
You can’t control interest rate rises, but you can look at your spending, and find areas where you can save. Look at your lifestyle and decide on what you can and can’t compromise on. Make extra repayments if you can or reduce payments to the minimum to maintain your lifestyle. These are all choices that can be made.
If you’re in a solid financial position, don’t let higher interest rates deter you from investing. Other factors such as growing populations or rental increases can drive economic growth. Don’t wait for conditions to improve, property is a long-term investment, so it is an excellent time to get ahead as property prices soften.
Is your fixed rate coming to an end?
When interest rates are low, people pay less attention to variable vs fixed, but many of us fixed our rate when it was low. Now it’s time to draw your attention to when your fixed rate is due to expire. Review your loan repayments six months out of the fixed rate expiring to determine if you can afford the new rates and retain your property or adjust your spending to accommodate the extra mortgage expense. Do you need to consider selling the property if the new repayment is too high? Or renting it out? These decisions are big choices, but a consideration if financial resources are limited.
Nerida says, “The best thing you can do is get in early to review and refinance. Don’t wait until it is too late. Consider moving your loan to interest only or rolling your interest only period to buy yourself more time.”
Look for ways to generate more savings for yourself to create a safety net as interest rates rise. Is there something you can cut back on, or ways you can earn more income?
Get on top of variable rates
Most people think they are not in control when they are. With home loans, don’t be afraid to shop around or negotiate with your existing lender. It’s not the time to be loyal and get stung with loyalty tax, you can search the market for a better deal. During the last two years, many people have changed their working situation, so look for lenders who can refinance and consider your current lifestyle. Many lenders offer a cashback offer to cover the costs of refinancing. Use a broker to remove the mental blockage of refinancing and make the process easier. It’s also an opportunity to look at your overall portfolio and seek the best interest rates.
Like changing insurance providers or super funds, there is huge procrastination around changing lenders, but it doesn’t have to be complicated. Investing a bit of time into refinancing could save you considerable dollars in the long term.
Understand your finances
We love our luxuries, but in these times, looking at your spending and making adjustments could mean you get to hold on to little luxuries like family holidays, a new dress or concert tickets.
Ashley says “It’s essential to understand your mortgage costs as a percentage of your budget and understand your own personal expenditure. We see so many clients avoid looking at their finances, which seems crazy when there can be big savings to be made. It’s not the time to have your head in the sand!”
Rising costs of living can be avoided with a bit of creativity and thinking. Simple changes to shopping, like buying fruit and vegetables that are in season, looking out for specials or buying bulk could help with the household budget.
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