There is panic in the media after the release of the most up-to-date inflation figures. It is almost a guarantee that interest rates will undoubtedly be increased later this week and probably at least once again before the conclusion of 2006. Many home owners remain coming to grips with the most up-to-date increase in May 2006.
Clients are consistently asking us what they should do to protect themselves from future rate rises. There's no simple answer and some decisions are simply a calculated gamble. As an answer to all the concerned The Aussie Method Home owners - here are a few useful tips on how to stay in front of the rising interest rates.
1. Take the anticipated rate increases under consideration
You likely have heard it all before but - Budget Makes Perfect.
Before you plunge into a house purchase or property refinance, remove a property renovation loan or end up buying a brand new car, please take the time to consider whether you are able to afford this expense. We strongly advocate that you set up an in depth budget. In this budget you should aspect in possible interest rate increases.
It is no good committing you to ultimately a loan which you may afford today but can't afford if the rates move up. It will be prudent to test the affordability of one's loans if the rates were to go up by around 2 percentage points. By knowing what you will have to do should the present rate hike continue you may well protect yourself from losing your property as time goes on
2. Review your overall loans
You may have a number of loans including credit cards, personal loans and the like. Generally these come to you at a The Aussie Method greater interest rate compared to the rate you are paying in your mortgage. If you should be looking for ways to truly save interest costs, the simplest method is always to consolidate your entire outstanding unsecured loans into your mortgage. Admittedly this is simply not always possible. To make the most of such debt consolidation you must have sufficient equity in your home.
3. Save some deposit
Despite most of the offers in the media for No Deposit Home Loans, it is not the most effective idea to behave on these. We're not in a buoyant property market now and every dollar you manage to construct towards your deposit can make you home loan repayments more affordable. Remember, every dollar you borrow attracts interest, therefore the more you save the better prepared you are when rates rise.
4. Consider a basic no-frills loan
Browse around at the available loan products. When you yourself have had your home loan for a while you might find that the Australian Home Loan market has grown and offers a range of flexible loans to accommodate most borrowers. A basic variable home loan can save as much as one percent off the typical variable rate. The products are limited in features, however if all you are after is cutting your rate down as much as possible - a no frills loan may be the answer.
5. Fix the rate
Although the best time to fix your mortgage rate is probably behind us, it could be possible to lock in every or part of one's loan for a competitive rate.
Fixed rates are great if you concern yourself with the interest rates leaving control. By fixing the rate you need to pay on your mortgage, you gain greater certainty over repayments and minimise the impact of further rate increases ahead. The fixed rates offered today tend to reflect what economists believe will happen to the variable rate in the future. When there is an expectation that the variable rates is going to be increasing - the present fixed rates will be greater than the existing variable rates. Hence fixing the rate becomes a kind of a chance that by paying more today you will save more tomorrow.
6. Raise the frequency of one's repayments
Among the easiest ways to cover off your loan sooner (and cut your interest bill) is to boost the frequency of one's repayments. You could choose to move from monthly to fortnightly repayments. Fortnightly repayments decrease the principal, providing you more equity and ultimately, lower loan costs.
7. Setup a Type of Credit
One of the greatest means of securing yourself against future rate rises (or any other financial eventuality for that matter) is to set up a distinct credit against your property.
Type of Credit or Equity Loans because they are also known, have gained great popularity of late. These products allow it to be possible for borrowers to cover extra on their house loan and "redraw" it when needed. You might just find that having usage of an additional five or ten thousand dollars could make it simpler to keep your mortgage in the case that your repayments are increased outside of your initial budget.