Interest rates may have gone up, but if you did not fix your mortgage in advance don't despair. Here are three ways to take on a rate rise and win:
1. Research, renegotiate and, if necessary, refinance
Monitor the financial market on a regular basis to stay up to date with current market trends. Examine your current loan product: interest rates compared to those of other lenders, and your ongoing fees and costs. Look at how these can be improved. Flexible, cost-effective loans should have a redraw facility, offset account, and allow additional and multiple repayments options.
If refinancing appears to be a viable option, remember this can only be of advantage if you're saving more money by switching, and should be used as an alternative only if the savings outweigh the costs.
2. Be vigilant at all times
Most borrowers are unlikely to be significantly affected but are still in a vulnerable position in terms of mounting interest rates triggered by the recent US sub-prime mortgage meltdown. A growing number of our major banks and non-bank lenders have already succumbed to inevitable rate rises and the future outlook remains unclear.
Borrowers should be alert, but not alarmed. If they receive a notice that their rate is increasing when there hasn't been an increase announced by the Reserve Bank, it might be time to take a fresh look at what the competitor is offering.
3. Commit to repaying above and beyond the call of duty
The fastest way to pay off your loan faster is by making extra repayments.
Beginning from the first year of the loan term, factoring at least an extra $50 aside per month saves you around $50,359 in interest, and will nibble away three years and seven months off the term. Put simply, that's just over $12 per week; the cost of a week's worth of a morning cup of coffee!
For further information please contact me @ IPS Home Loans on (02) 4227 5511.
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