An interest rate rise will increase the cost of home loan repayments, forcing homeowners to spend more on their mortgages. During this tough economic climate, this can understandably cause stress and uncertainty for many Australians. We’ve compiled five ways to protect yourself from interest rate rises, ensuring that you can live with your home loan.
How do I prepare for interest rate rises?
1. Refinance your home loan
If you’ve had your loan for a few years, chances are it may no longer suit your current needs, and you may be paying more than you should. By refinancing your home loan, you can switch to a mortgage with a lower interest rate and features that you can leverage to your advantage.
2. Should I fix my interest rate?
Fixing your mortgage lets you lock in an interest rate for a period of time – generally one to five years. During this fixed period, your repayments will stay the same even if rates increase – giving you peace of mind. However, it should be noted that with a fixed interest rate your ability to make extra repayments may be limited, and there are fees for ending before the final date of the fixed period.
3. Make extra repayments on a home loan
If you’re in a good financial position, you might consider making additional repayments above your standard repayment amount. Even a small amount, such as $100 extra per month, can make a big difference. Making additional repayments will help to reduce your loan amount, as well as the amount of interest charged. If you have redraw with your home loan, you may be able to access these additional repayments in the future for any financial emergencies, like sickness or the loss of a job.
4. Reduce spending and debts
Take time to review your budget and find ways to cut back on spending. If you have any ongoing debts, focus on paying them off. A helpful tip is to pay more than the monthly minimum amount and consolidate multiple debts into one to make them more manageable.
5. Speak to an expert (us!) about interest rate rises
Book an appointment with one of our Borro brokers today or call the team on 1300 1BORRO.
