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Nearly 880,000 borrowers will need to find hundreds or thousands of dollars more each month when their fixed rate expires this year. Here are four tips to soften the blow.
The RBA estimates 90 per cent of the fixed rate loans finishing this year or next year will have to wear mortgage repayment increases of at least 30 per cent. While it is not possible to avoid the rise, there are ways to soften the blow.
Here are our tips for those facing the higher interest rates.
Don’t wait until your fixed-rate date ends, get the wheels in motion now.
If you have any type of loan on fixed interest, gather all the information and contact a mortgage broker (ideally 60 days prior to the expiry of your fixed rate loan). Having time to address the problem and look for solutions will result in the best possible outcome. If you wait too long, you will find your options limited.
In addition to a proactive review, we suggest fixed rate borrowers start making payments at the higher rates now. This has two main benefits:
Don’t proceed with a narrow mindset about what can be done. For example, loyalty to your current lender shouldn’t be part of your considerations. Instead, speak to your mortgage broker about the wide range of lenders available. The big four banks aren’t the only option. There could be that a smaller lender that offers the right product for your needs.
If refinancing is an option, you may get a competitive variable rate, maybe even a cashback offer and also the chance to reset your loan to a 30-year term to ease the budget pain.
Another solution is to look at waysof restructuring your entire portfolio and loan arrangements.
For example, you may have been paying interest only on your investment properties while paying down your home loan, resulting in a buffer of funds. In that case it might make sense to redraw that facility and reduce debt on other assets. Of course, each person’s situation is different, and their options need to be considered according to their specific needs and objectives.
Any finance restructuring should be done while considering your reduced home budget and related cash flow.
Coming up with a solution won’t help if you fail to implement the changes themselves. Make sure you act on the guidance of your professional advisors and do what needs to be done.
If you need to gather additional financial information for the mortgage broker, then don’t hesitate. All the small steps will put you in a better financial position in the long term.
If you need to reduce spending to improve your chances of refinancing, then do it.
The information provided is general in nature and should not be taken as advice as it does not take into account your personal circumstances, needs or objectives. Individual lender criteria applies to the approval of credit products. Terms and Conditions and lending criteria apply and rates are subject to change. Refinance home loan.
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