The saying 'make hay while the sun shines' holds true for dealing with home loan interest rates.
If you make extra repayments while rates are low you will reduce your loan balance, save on interest and build a buffer to minimise the impact of future rate rises.
If you are not sure by how much you might increase your repayments, you could:
Have another look at your budget and see if there are any expenses you could reduce to make extra payments on your loan.
Use the Defence Bank mortgage calculator to work how much your repayments could be.
Make more frequent repayments
Not only will this strategy save you interest every time you make a payment, by the end of the year you will have made extra repayments, as there are more than 4 weeks or 2 fortnights in a month over a calendar year.
Coping With A Home Loan Interest Rate Rise
If interest rates rise and you're not prepared, here are some things you can do to keep afloat.
Looking critically at where you spend your money can often shine a light on areas where money is wasted or being spent on things that aren't really important. Think about what luxuries you might be prepared to give up so you can afford your home loan repayments.
It is advisable to develop a consistent savings plan and sticking to what you can afford and avoid unnecessary spending. Build an emergency savings fund to prepare for unforeseen situations. Defence Bank has a few savings account options that are worth looking into.
Think about what other assets you have that you may be able to do without. For example, if you have two cars, could you make do with one? Selling an asset you can't really afford to maintain will provide an instant boost to your mortgage and may even reduce your expenses.
It might be a good idea to review your mortgage at least once a year to check if there might be a better deal to suit your current financial situation. Talking to a financial advisor or mortgage broker will give you an indication of what to expect when switching home loans.
If you’d like to find out more about your home loan options, contact Defence Bank on 1800 033 139 or via their website.
Defence Bank recommends you read the Defence Bank Products and Services - Conditions of Use for any product you choose to take. Any advice contained above is general advice only. This information does not take into account your personal objectives, financial situation or needs.
Loan applications received are subject to Defence Bank’s lending criteria. Terms and conditions, fees and charges apply and are available upon request. Please refer to defencebank.com.au for current rates. Defence Bank ABN 57 087 651 385 AFSL/Australian Credit Licence 234582