With an ongoing focus on interest rates, now could be the perfect time to make some clever and practical changes to your finances and learn how to prepare for any further fluctuations with our helpful tips.
\nAssess your budget
\nNow is an ideal time to look at your finances and take stock of your expenses.
\nCreating a written copy of your spending habits to keep track of and highlight any behaviours can be a great way to note any negative patterns. Assess your current weekly or monthly costs and note the areas you can limit spending.
\nOptions to consider may include limiting weekly takeaways in favour of cooking at home or forgoing an international holiday for a domestic staycation.
\nManage your debts
\nGetting on top of existing debts can go a long way to helping you manage your home loan.
\nYour financial advisor could help you review and consolidate debts such as personal loans, car loans, credit cards, or bills, into your home loan or a separate personal loan, which could save you money. This method translates to one repayment per month, reducing interest rates.
\nHome loan interest rates are generally lower than other account interest rates, so by consolidating debts into one repayment, you could immediately begin to save.
\nWe recommend always seeking advice from a financial advisor before making any decisions.
\nAsk for a lower rate
\nIf your home loan has been with the same lender for several years, it may be time to shop around for a new rate.
\nLenders tend to advertise lower, more desirable rates in the hopes of attracting new customers. If your bank is offering a similar deal, speak to them about changing to the advertised rate. In case they turn you away, be ready to head online and compare other banks and lenders.
\nBefore choosing a new deal, read through any fees or costs that may be associated with the account. Common fees include one off and ongoing fees, application fees, monthly fees, exit fees, and annual fees. Before you commit, always seek independent legal and financial advice on your options, rights, and liabilities.
\nWhether or not you choose to switch to a new home loan, taking the time to understand the hidden fees can be a simple way to prevent stress in the long run.
\nReview your interest rate
\nHome loans are available in three options: variable, fixed rate, and split loans.
\nFixed rate terms are most commonly offered for periods of 1-5 years, whereas variable rates are subject to the current interest rate. Split loans allow for a percentage of your mortgage to be fixed while the component is subject to a variable interest rate with an offset account.
\nReview with your financial advisor to discuss whether your current home loan is still your best option.
\nUse your offset account
\nAll variable home loans feature an offset account, and it\u2019s an essential tool for lowering your interest payments.
\nUse your offset account as a regular transaction and savings account. Having money in your offset account reduces the interest you will pay on your loan. Any funds in your account will offset your home loan balance and reduce the interest you pay. Ensure your monthly salary is paid directly into your offset account.
\nIncrease your repayments
\nIncreasing your repayments can save you money long term. Speak to your bank about making repayments every two weeks instead of once a month.
\nAccidentally, you will end up making an extra two repayments, as there are 26 fortnights in a year, but only 12 months. In this way, you could pay off your mortgage years in advance.
\nAsk your bank for assistance
\nIt is in your bank\u2019s best interest that you finish paying your mortgage, so if you\u2019re struggling financially and cannot meet your monthly repayments, tell your lender early.
\nMost banks offer payment assistance plans and are willing to work with their customers on repayment options.
\nInterest rate hikes can be stressful, but by taking the time to discuss your options with your lender, assessing your expenses, analysing your debts, and considering alternative banking solutions you can take control of your finances for clarity and financial stability well into the future.<\/p>\n
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this article contains only general information and DFC provides no guarantee that the information in this article is accurate, current or complete;
\nthis article does not take into account any individual\u2019s particular circumstances;
\nthis article does not constitute any legal, tax (including stamp duty), financial or investment advice and is not to be relied upon as, nor to be used as a substitute for, legal, tax (including stamp duty), financial or investment advice. <\/p>\n
You alone are solely responsible for determining whether any investment, asset or strategy is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult a suitably qualified professional about your specific legal, tax (including stamp duty), financial or investment situation before purchasing off-the-plan property.
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