Despite the RBA holding the cash rate at 1.5%, Australians are still feeling the economic pressure when it comes to home loans. If you are feeling a little bit hot under the collar due to the economic pressures that are imposed by an ever-increasing home loan and other financial obligations, you are not alone. These five simple steps will help you ease off the stress of your home loan should there be a rate increase.
You can negotiate a home loan rate that is affordable
Instead of using your usual set and forget method when it comes to your home loan the best way is to constantly review if your home loan rate meets your current financial situation. Nearly 40% of Australians are not aware of their home loan interest rate, which can make a huge difference in you saving thousands of dollars or falling into a deficit of thousands of dollars should there be a rate increase. You can always negotiate for a better rate or find greener pastures elsewhere.
Buy what is within your reach
If you are not a homeowner and you are on the market to purchase a house always keep in mind to purchase what you can afford. It’s not how much you can borrow, but how much can you afford to borrow. When you buy your house or scour for a home loan quote think about whether you would still be able to afford it should there be a rate increase. Would you still be able to afford the repayments should you find yourself unable to work for whatever reason? It always best to think ahead
Use the offset account feature
Some home loans have an offset account feature. This feature that is attached to your mortgage comes in handy when you want to deposit money that will offset the principal of your loan. This, in turn, will reduce the interest you will have to pay. You will have to discipline yourself not to go into your offset account to pay off other things as this will bring you back to square one.
The type of credit card you have also plays a role
Household debt is one of the largest debt that Australians have to deal with. The household debt to income ratio currently stands at almost 200%, which the Australian Bureau of Statistics reported as $2.466 trillion. Your credit card could be the reason why you could fall into debt quicker than a person in quicksand. It is also important that your credit card interest rate and features are something that works with your finances. If there are any outstanding payments on your credit card you need to have it sorted out as soon as possible before an increase comes around.
Strike while the rates are low
Fortunately, the rates have not yet increased. This means that now is the perfect time to make extra payments on your repayments. You might feel a bit hot under the collar at the thought of making extra payments, but your future self will thank you when it comes to the rate increase. By then you would have decreased the amount you owe that the increase will have little effect on you.
This does mean making a few healthy cuts from your budget on things that you don’t need. If you find yourself struggling to find places to make a cut you can always speak to a financial advisor who will help you make a sound decision.