subject: How Will Interest Rate Rises Affect Your Home Loan Repayments? [print this page] By reviewing your Home Loans there are many savings to be made just by moving or changing little things with your loan. You may not even need to change banks in order to get a better interest rate. Speak to a mortgage broker before you make any changes to your home loan - your mortgage broker will make sure that it is in your best interests.
Below are some steps you can take to reduce the effects of rising interest rates.
1. Consider fixing your home loan
If you are on a tight budget and want to know exactly what your repayments will be each month, then you should consider fixing part of or all of your home loan. You can lock in an interest rate which will not go up and down with variable interest rates. A fixed rate loan means your interest rate is fixed for a set period of time, for example 1 to 5 years. Before you fix part of or all of your home loan, speak to a qualified mortgage broker first to ensure this is the best option for you. You should consider that if you fix your home loan, you may lose some flexibility with your mortgage loan.
2. Increase your loan to a 30 year term.
Increasing the term of your home loan to a maximum of 30 years will help to reduce your home loan repayments. For example, based on a $250,000 home loan with an interest rate of 7.07%, if you extend your home loan term to 30 years, your monthly repayments are reduced by $103.
3. Be aware of honeymoon rates.
Honeymoon rates may seem enticing as the interest rate is usually one percent lower than the standard variable rate. However, you need to take into consideration the fact that after the honeymoon period expires (usually after 12 months), your interest rate will revert to the standard variable rate. If you decide to take an introductory home loan, make sure you are aware of what your new interest rate and monthly repayments will be after the honeymoon period has expired.
Speak to your mortgage broker about a home loan review to ensure that your home loan is still the best product for you based on your needs and current circumstances.
