With the news that all of the big four banks have lifted their interest rates on owner occupier home loans, and a number of non-major banks following suit, many Australians will now be facing an increase in mortgage repayments.
The rate rises will no doubt have impact on many household budgets and as families adjust, there are a few things you can do to manage your mortgage. Here are three steps to help your preparation.
Do the sums
The first thing to do is work out how much your additional payments will be. Generally, the bigger the mortgage, the bigger the increase will be. Knowing exactly how much extra you will pay each month and what that equates to each year can help you budget for the long-term.
There are a couple of ways you can do the sums; using online calculators and inputting your exact mortgage details or speaking with your mortgage broker – they can run the numbers for you.
Write a new budget
There’s not a lot of point of working out how much extra you have to pay on your home loan if you don’t apply it to your household budget.
Write in your new mortgage repayments and assess how comfortably you can meet your revised budget. If you identify that you are going to struggle financially, take the time to look for areas when you can save money. It may be necessary to change your spending habits in order to adjust to the increased repayments.
The important thing is to plan straight away to avoid any nasty surprises down the track.
Weigh up your options
As the interest rate rises come into effect, there are a few things you can consider to help ease the impact on your mortgage. Of course, not every option will be suitable for your circumstances, so it’s important to assess the situation carefully.
Can you change the frequency of your repayments? It might be simpler and easier to manage weekly or fortnightly repayments rather than monthly – or vice versa.
Are you in a position to make a lump sum payment? If you are able to, a lump sum payment can make a significant dent in your mortgage and can even help offset an interest rate rise by putting you ahead on your mortgage.
Is refinancing or fixing your interest rate an option? This is probably the hardest question to answer and requires a lot of research. The easiest way to know if changing your home loan is the right decision is to speak to your mortgage broker – they can do all the legwork for you and give you all the information to make a smart choice.
If you need assistance please contact us. 02 9386 0500
Article Courtesy of Amanda Barros