When you take out a home loan, you have a good idea of how much you can borrow and what your repayments will be. However, economic conditions can change alongside your personal financial situation. It could be a loss of income, unexpected emergency or, as we see happen often, an interest rate rise that means your repayments are no longer sustainable.
We’ve seen the last of these happen recently, with a major lender raising variable interest rates on owner-occupier and investment home loans by 20 basis points. When this happens what should you do?
Tap into the rainy day fund
While home loan repayments can be an impost on your regular savings, those that can, should continue to put money aside. After all, who knows when situations like this will arise? Having a savings fund aside that you can access to top up repayments could see you weather the storm of higher interest without breaking a sweat.
Think about home loan refinancing
This is a popular option for many Australians that start to feel the heat from interest rates rises. After all, when one lender raises rates there is likely to be many others that still have more affordable options. That’s the beauty of using a mortgage broker – they can tap into a huge range of products and help you find one with a more appealing interest rate on an investment home loan.
The recent jump occurred due to tighter controls from the Australian Prudential Regulatory Authority, which oversees our country’s lending. If more regulations come into place, we could see even more lenders hike their rates. It’s important to keep an eye on, and to be prepared for.
Having a chat with me could be a great way to work out how to prepare for higher rates, and how you can deal with them efficiently.
As always I am just a phone call away on 0411 777 876