You don’t have to take the Reserve Bank’s increase on the chin we explore a few idea’s that you can use to help combat any rate rise.
Fixing your rates
Fixing your rates has always been a good form of insurance when in an unstable economic environment. That said it does have draw backs namely it locks you in and generally you lose features like the ability to make large lump sum payments, redaw facilities and early payment of the loan. There however are products out there that do have some of these features and maybe not all of these feature are important to you. The fixed rate market has been increasing for about a year now and in light of what has just happened these rates are going to keep rising in the near future so if fixing is something you are thinking of your window is rapidly closing.
Now some strategies for fixing, first and the most common is to fix a portion of your loan e.g. 50% fixed and leave the rest on variable. This way you have a greater protection if rates do rise because half your repayment is protected by the fixed rate and if rates do drop you also get the benefits. You also can get access to features like extra repayments or redraw. Fixing the entire loan gives you peace of mind for the entire period which you can easily budget for.
Put your tax into your mortgage and save
Putting extra into your mortgage is no new concept but finding that extra is the key. There are a few ways that for many are sitting right under there nose. Your upcoming tax returns and family benefits can be used to reduce your loan.
This same theme can be used for any extra money you may get e.g. pay rise, sale of equipment (e.g. car, boat, caravan). So any extra money you get put it into your mortgage, you can always get it back via redraw if needed.
You can save money by making repayments fortnightly. If you divide your monthly repayments in half and make your repayments once a fortnight, you make one extra repayment each year. Because of this you reduce the overall term of your loan, without felling the pain of extra repayments.
As always the best way to pay less for your home loan is to have a cheap home loan to start with.
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