How will interest rates affect your home loan repayments |
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The Reserve Bank of Australia just recently lifted the official interest rate to 4% on Tuesday, 2 March 2010 with predictions of more increases throughout the year. But regardless of whether interest rates rise or fall, it is always a good idea for home owners to prepare for slight increases in interest rates so that they do not get caught out. Just by reviewing your home loan, you will discover that there are many savings to be made just by moving or changing little things within your home loan set-up. Often, you do not even have to change banks in order to get a better interest rate.
Below are some steps you can take to reduce the effects of rising interest rates: 1. Consider fixing part, or all, of your home loan If you have a tight budget and want to know exactly what your repayments will be in 2 years time, fixing your home loan can allow you to lock in a rate which will not go up and down with variable interest rates. However, you do have to consider losing some flexibility in your arrangement. 2. Increase your home loan term from 20 or 25 years out to a 30 year term By increasing the term of your home loan from 25 to 30 years, you could reduce your monthly home loan repayment considerably. Based on a $250,000 home loan at 7.07%, increasing your home loan term to 30 years will reduce your repayments by $103 per month. 3. Don't be fooled by Honeymoon Rates Some mortgage lenders advertise very low honeymoon rates to home buyers in an attempt to lure more clients. Often these products default to a higher-than-standard variable rate after the honeymoon period has expired, usually after 1 year. If you do take a honeymoon or introductory rate for the first 12 months, make sure you know what your home loan repayments will after the honeymoon period expires consider even making these payments through the initial 12 month honeymoon period. This will enable you to get 'ahead' in your repayments along with avoiding the shock of the honeymoon rate finishing. 4. Consolidate your debts As the cost of money rises across the board, personal loans and credit card interest rates often rise with home loan interest rates. Consider rolling your multiple debts into your property home loan. This could save you having to pay a much higher rate of interest and in most cases can save you about 10%. For more details and assistance with your home loan, or for a home loan review, contact one of our mortgage brokers at Intellichoice on 1300 55 10 45 for an obligation free health check of your finances and home loan. |
| Last Updated ( Monday, 15 March 2010 13:58 ) |
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