When the Reserve Bank of Australia (RBA) announces an increase in interest rates, mortgage holders brace themselves for higher repayments. To maintain financial security, here are some tips to stay on top of your mortgage.
- Review Your Loan Regularly: It’s important to assess whether your current loan aligns with your financial situation. Consider exploring features like offset accounts or negotiating for a better interest rate. Surprisingly, Canstar research reveals that 63% of Australians haven’t attempted to negotiate their interest rate in the past year, and only a quarter of those who did were unsuccessful. If you need assistance, feel free to reach out to us for guidance. If we find that your lender isn’t providing fair terms, we can help you explore other options.
- Explore Competitor Lenders: According to Canstar research, 77% of holders may be paying more than necessary by not switching loans. Data from the RBA in November 2022 shows that existing variable owner-occupier home loan rates averaged 5.29%, while new loans averaged 4.79%. This indicates a “loyalty tax,” where banks offer better rates and features to new mortgage customers. Let us assist you in finding suitable refinancing options to save on your mortgage.
- Avoid the Mortgage Trap: Before refinancing, assess your debt-to-income and loan-to-value ratios. These ratios help determine your ability to switch to a better interest rate without being trapped in an unfavourable mortgage. The debt-to-income ratio compares your total debt to your gross income, giving lenders insight into your financial management and borrowing capacity. Ensure you manage other debts, such as car loans and credit cards, to strengthen your credit rating. The loan-to-value ratio compares your loan amount to the assessed value of your home. If your property’s value decreases significantly, it could impact your ability to refinance. Refinancing before your equity drops below 20% can prevent complications. If you find these concepts complex or lack the time to navigate them, we’re just a phone call away.
- Track Your Spending: While you may have already reduced your spending, it’s beneficial to track your expenses systematically. As the popular saying goes, “What gets measured gets managed.” Tracking your spending will provide insight into where additional changes can be made, which can be eye-opening and help you save.
By following these strategies, you can better manage your mortgage and maintain financial stability in the face of rising interest rates.
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If you’re searching for a more comprehensive tool to help you manage your finances, we recommend checking out the MUM CFOs Money Masterclass course. This course offers a wealth of knowledge from financial professionals in various fields, including financial planning, credit repair, mortgages, accounting, investments, insurance and estate planning. By learning from their expertise, you will gain the tools and strategies necessary to achieve your financial goals. Don’t miss out on this valuable opportunity to enhance your financial literacy and take control of your finances!
