Economists are predicting that home loan rates will rise in 2015. For the investor and home buyer this means that you’ll need to be prepared so that you can keep on top of your home loan repayments.
Given that the official cash rate last rose in November 2010, investors and home buyers may not be prepared for a rate rise. This may be due to them not having experienced home loan rate rises before, or due to them becoming relaxed about rate rises because the official cash rate has been at record lows for more than 12-months.
However, rates may change in 2015, with economists suggesting that rates will rise 1.5 percent over the next two to three years. For the average home loan holder of a $300,000 mortgage this could mean needing to find more money to meet monthly home loan repayments. Therefore, now is the time to start considering your options so you can avoid rate rise pressures.
Hints and Tips to Avoid Rate Rise Pressures
If you’re on a variable rate, and rates rise, then you need to be aware that you’ll need to find extra money each month to cover the increase in your mortgage repayments. For instance, if you have a $300,000.00 home loan and rates increase by .25 of a percent, then you’ll need to pay an extra $50 a month to meet your loan repayments.
However, the good news is that there are ways to increase your cash flow so that you avoid rate rise pressure. These are as follows:
1. Start building a back-up fund so that you have greater cash flow later on down the track. This fund can be linked to your mortgage or it can be in a separate bank account. When setting up this account, select a term saver that allows you to generate greater interest, but still allows you to have your money at-call if you need to use it. This way you are making your money work for you.
2. Use an offset account and redraw facility to reduce your interest. A redraw facility can also allow you to pay more off your home loan when you have the spare cash. This, in turn, can allow you to get in front with your home loan repayments.
3. Consider a fixed rate home loan that allows you to lock in your interest rate for 1 to 5-years. This can enable you to budget more effectively and can also give you greater financial freedom. But, you also need to be aware that your interest rate will revert to the market variable rate once your fixed term has ended.
Do you want to know more about how you can beat rate rise? If so, then contact eChoice and find the right home loan for YOU today.
Written by eChoice