With every RBA rate rise announcement, mortgage holders brace themselves for impending repayment increases. Here’s how to stay on top of your mortgage and feel financially secure.
Let’s face it, the RBA’s rate rise cycle hasn’t been easy for mortgage holders, with average monthly repayments now hundreds of dollars (and in some cases, thousands of dollars) more expensive than they were a year ago.
Pair this with the rising cost of living and many Australians are eager to bolster their finances to weather the storm, especially as there are one or two more rate rises predicted to come.
But rest assured, there are things you can do to help manage your mortgage and stay on top of your finances.
1. Review your loan
Regularly reviewing your loan can help you assess whether it’s best suited to your current situation.
You may be able to access features that may benefit you such as an offset account. And even get a better interest rate.
Canstar research shows 63% of Australians haven’t attempted to negotiate their interest rate with their lender in the last year.
And only a quarter of those who did were knocked back. But you don’t have to run the risk of rejection yourself.
Get in touch with us and we can go in to bat for you.
And if we don’t think your lender is playing fair, we can help you look elsewhere. Which brings us to our next point…
2. What are competitor lenders offering?
Canstar research shows that 77% of mortgage holders may be paying more than if they switched loans.
And RBA data from November 2022 shows that on average, existing variable owner-occupier home loan rates were 5.29%, while new loans had an average rate of 4.79%.
This is known as the “loyalty tax” – where banks often only pass on better interest rates and features to new customers.
But we can help you out.
Let us do the legwork and find suitable refinancing options so you can save.
3. Avoid the mortgage trap
Before you refinance, it’s good to get a picture of your debt-to-income and loan-to-value ratios.
This can help you avoid being trapped in a mortgage without the ability to switch to a better interest rate.
Your debt-to-income ratio is your total debt divided by your gross income. Lenders use this to assess how you manage money and to calculate your borrowing power.
So if you’re seeking to refinance a $700,000 home loan (and have no other debt), and you have $160,000 in gross household income, your DTI is 4.375 – a ratio most lenders would be very comfortable with.
So make sure your other debts – such as car loans, and credit cards – are being managed, as well as your mortgage. It can help bolster your credit rating.
Your loan-to-value ratio is the comparison between your loan amount and the assessed value of your home.
This means that a drop in your property’s value can affect your ability to refinance.
And thus, if your equity drops below 20% some lenders may not accept your application to refinance. So refinancing at the right time (ie. before prices fall too low) can help you avoid being locked into your current mortgage.
If all this sounds complex or you just don’t have the time, we’re only a phone call away.
4. Track your spending
Like many of us, you’ve probably cut back on spending already.
But there’s a popular saying that rings true: “what gets measured gets managed.” Track your spending and see where additional changes can be made.
It can be a real eye-opener.
You may think “they can pry my daily cafe-bought triple shot latte from my cold dead hand” … but when the cost is tallied up, you may change your mind.
And that streaming subscription you never use and forgot about is still coming out of your bank account like clockwork.
5. Speak to us
Want a hand with all the above?
We can help you to refinance, consolidate your debts, manage application processes, and much more.
Get in touch today and we can help you through the refinancing process, even if there is possibly another rate rise or two to come.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.