Archive for Budget

3 ways to help prepare for interest rate rises

The latest news that all of the big four banks have lifted their interest rates on owner occupier home loans, and a number of non-major banks following suit, will see many Australians will now be facing an increase in mortgage repayments.

This will no doubt impact a lot of household budgets and to help you prepare here are three things you can do;

1. Do the Numbers

First work out how much your additional payments will be. Knowing exactly how much extra you will pay each month and year will help you prepare your budget.

To help you do the sums; you can use our mortgage calculator by inputting your exact mortgage details or speaking with your mortgage broker – they can run the numbers for you.

2. Set a new Budget Plan

There’s not a lot of point of working out how much extra you have to pay on your home loan if you don’t apply it to your household budget.

Write a new budget plan with your new mortgage repayments and assess how comfortably you can meet it. You may find that you are going to struggle financially, so take the time to look for areas where you can save money. It may be necessary to change your spending habits in order to adjust to the increased repayments.

The important thing is to plan straight away to avoid any nasty surprises down the track.

3. Consider your Options

An interest rate rise is something you need to prepare for, do your research and make the right, sometimes difficult choices.

Doing the numbers and setting a plan are two parts of the puzzle but in the end you still need to make your payments.

Have you looked into changing the frequency of your repayments? It might be easier to manage and less of a burden paying weekly or fortnightly repayments rather than monthly – or vice versa.

Maybe you have some savings and are able to make a lump sum payment? A lump sum payment could make a dent in your mortgage and could even help offset an interest rate rise by putting you ahead.

Is refinancing or fixing your interest rate an option? This is probably the hardest question to answer and requires a lot of research.

To get help you make the right choices with the research done for you, my advice would be to see your mortgage broker or let me know and I can put you in touch with my mortgage Guru!

Preparing For Re-Financing before buying or selling a new home

Financing Basics

When you make the decision to sell your home, you’re entering an active real estate market. If you play your cards right, your home can sell fast. An overwhelming number of buyers borrow money to purchase real estate, so understanding how the lending process works is important.

Calculating your Budget

If you don’t already operate from a formal budget, part of the process in selling your home should be to create a financial statement that shows your income, your debts, and how your finances fit into the big picture. Finance professionals can help you with this, but the process isn’t hard if you follow a few basic steps. From the your big picture financial statement, prepare a budget that includes all of your monthly fixed expenses (current mortgage, car payments, utilities) and your best estimates for the variable ones, such as food, gasoline, and entertainment. As you document this information, make note of the balances on any outstanding loans and how much you are paying each month. If you have some small debts hanging out there, it’s a good idea to pay them off. A budget can help you see areas where you can reduce monthly spending in order to apply the savings to paying down your debts.

What Lenders Are Looking For

While a history of responsible credit is good when applying for a loan, too many small loans or debt obligations are not. A good rule to consider: the fewer debts you have on your financing application, the better. Many finance experts recommend that if you have several small loans, you consolidate them into one loan to achieve a better interest rate and an easier to manage payment system. This also may look more favourable on your loan application than several smaller debts and obligations. Once you have paid down any debts, and once you have consolidated your smaller loans, speak with your current lender as well as other banks to find out how much money you can qualify to borrow for a new home. Once a lender has told you how much you can borrow, you will have an important piece of information to use when looking for your next home or evaluating offers on the home you are selling. When determining your borrowing power, also keep in mind any costs that may be associated with closing out your current loan. If your bank has pre-payment penalties, you will need to factor those costs in to your costs at settlement.

Staying on Top of Your Mortgage

Variable rate mortgages often offer what the industry likes to call “honeymoon rates,” which are lower interest rates early in the loan life. These rates increase to larger interest rates down the road. If you decide to accept terms like this, be sure to keep an eye on your budget and make sure you’re prepared when the time comes for your rate to jump. Often these mortgages are structured to jump periodically, such as every 12 – 36 months. Some mortgages adjust upward with the market. Be sure you know what you’re getting into before you sign any mortgage documents.

It’s good to periodically test the market for better rates; especially if you have a good credit history or if you get additional debts paid off after securing your mortgage.