A mortgage broker can assist you with strategies to tackle increasing interest rates. An increase in interest rates can have a significant impact on your personal finances. Read on for some tips on how to combat rising interest rates.
As a homeowner, one of the most significant financial concerns you may face is the increasing interest rates on your mortgage. The RBA have been through a period of increasing interest rates to combat inflation in the Australian economy. However, this has impacted homeowners by significantly increasing their mortgage repayments.
Rising Interest rates can have a significant impact on your monthly mortgage payments, and if you’re not prepared, they can quickly become a burden on your finances. With a few strategies, you can manage increasing interest rates and reduce the stress on your personal finances.
In this blog post, we will discuss some of the most effective strategies to help homeowners tackle increasing interest rates. Of course, everyone’s circumstances are different, so seek advice pertaining to your personal circumstances. Talking to a mortgage broker would help in implementing some of these strategies.
Refinance your mortgage
One of the most common and effective strategies for homeowners facing increasing interest rates is to refinance their mortgage. Refinancing involves replacing your current mortgage with a new one that has a lower interest rate. This can help you reduce your monthly payments and save money in the long run. You can also pull out some equity from your home loan to retain a small buffer in case something unexpected comes up. It’s important to note that refinancing does come with certain costs, such as closing fees and appraisal fees, so you should carefully evaluate whether it’s the right move for you. Speaking to a mortgage broker is the best way to evaluate which bank will give you the best offer based on your personal circumstances.
Make extra mortgage repayments
If you are flush with cash and you’re noticing that your mortgage isn’t reducing as much as it used to, another effective strategy to help you manage increasing interest rates is to make extra payments towards your mortgage.
By making extra payments, you can reduce the principal balance of your mortgage and ultimately save money on interest charges. If you’re not able to make significant extra payments, even a small amount can make a difference over time.
A flexible way to achieve this is through a home loan offset account.
Consider a fortnightly or weekly mortgage repayment
If you’re not able to make extra payments towards your mortgage, you may want to consider fortnightly or weekly mortgage repayments. Using this strategy, you reduce your payments but increase the quantity of repayments. This can help you reduce the amount of interest you pay over time. By making payments more frequently, you reduce the amount of time that interest is calculated on the principal balance of your mortgage.
Use your home equity for debt consolidation
If you’ve built up a bit of equity in your home, you may be able to use a debt consolidation strategy to manage your cash flow a little better with the impact of increasing interest rates on your mortgage repayments. You might have other loans that are costing you more such as personal loans, car loans or credit cards. Although this strategy can increase the period of your home loan, it can take a lot of pressure off. Speak to a mortgage broker about debt consolidation to better understand the impacts to your personal circumstances.
Reduce Other Expenses
Finally, if you’re struggling to manage the impact of increasing interest rates on your mortgage repayments, you may need to reduce other expenses in your family budget. This may mean cutting back on discretionary spending or finding ways to reduce your monthly bills. By reducing your overall expenses you may be able to free up some money to put towards your mortgage payments. Then, have a chat to your boss about whether there are any additional shifts available or any pay rises expected in the near future. Knowing what is coming gives you a timeframe to work towards when you reduce your standard of living slightly by reducing your discretionary spend. There are a number of strategies for managing the impact of increasing interest rates on your mortgage repayments. Whether it’s refinancing your mortgage, making extra payments, using your home equity, or reducing other expenses, there are options available to help you reduce the burden of increasing interest rates on your finances. By taking proactive steps now and talking to your mortgage broker you can better protect your financial stability and lessen the burden imposed by the recent interest rate rises.
A mortgage broker that can help
If you need advice or assistance with a mortgage, One Click Life can help you save more on your home loan by choosing the right mortgage provider for you.
If you are not looking for a mortgage, One Click Life can also take care of your Taxes, Will, and Health Insurance. Claiming your tax return online is a simple process with One Click Life. The best part is, you can claim your online tax agent fees back on your next tax return.