With interest starting to rise, it’s time to get smart with Wanda Rowan from Personalised Mortgages
Unlike the banks, Sydney Top 3 Local Choice, Wanda Rowan from Personalised Mortgages treats customers as people, not numbers. We love that Wanda strives to build lasting relationships with clients and is still working with some of her very first clients from over 10 years ago.
We all heard the news- interest rates are starting to rise! So we sat down with Wanda to pick her brain on what advise she can give to homeowners in this difficult time. Here is what Wanda had to say.
It’s no secret…
Interest rates are rising! If you didn’t fix all or part of the year loan earlier in the year, chances are you have ‘missed the boat’ on securing a lower fixed rate.
What can you do in an uncertain market?
Firstly, I would recommend you reach out to your broker to ask your lender for a rate review. My belief is, if you don’t ask, you don’t get and there is certainly nothing to lose by asking. What is the worst they can say?
Secondly, by all means, review “cash back” offers that some lenders are splashing around, but be aware you will still have discharge fees with leaving your current lender and ensure you compare apples to apples (does the new lender offer you the features you want or need?)
Ask your mortgage broker to review the offers to ensure you are actually making an overall saving compared to what you currently have. Also, be aware that Every finance enquiry will put another mark on your credit file, so I wouldn’t be chasing ‘cash back’ offers unless there is a genuine saving to be had.
What can you do to help ease the pain of interest rate rises?
When brokers and lenders “assess” your ability to repay a loan, a buffer is calculated into the servicing initially anyway. For example, your payments may be based on a rate of 2.5%, but your servicing was calculated assuming the rate was perhaps 6% to 7.5% (depending on individual lenders’ assessment policy). Lenders do this to ensure that if there are rate rises, you can still (effectively) afford to make your repayments.
One effective way you can ease the shock to the hip pocket of rising interest rates is to start paying NOW assuming the rate is higher. If your current rate is 2.5%, pay the loan as if it is in fact 3.5 or 4%.
Why do this?
For a few reasons – you get into the habit of paying slightly more on your mortgage and can adjust your budget accordingly. The more you can pay onto your loan, the less interest you will pay. Any additional over and above your minimum paid can be accessed still as Redraw if needed (Talk to your broker about the pros/cons of redrawing). Paying fortnightly or weekly instead of monthly (if your budgeting preference allows), can also make a significant difference to the interest and term you can save – talk to your broker about how this helps.
If you do look to refinance – for rate, cashback, etc, also consider the Term your loan is going to go over. The Shorter the term, the Higher the repayments – the Longer the term, the lower the repayments. But there can be a catch. If your current term only has 20 years left and through refinancing, you extend the term again to 25 or 30 years, it could wind up costing you more in the long run. In the short term it may ease cash flow in the household, but please make sure you understand this. Ideally, in a refinance you would do Term for Term and have evidence that the change of lender would provide you with some overall savings. If you do take a longer-term (with lower repayments), but can comfortably afford to make the higher repayments, then do so. You build a buffer, save interest and reduce the term by paying off quicker anyway. Just remember that If you don’t make the extra payments and/or Redraw additional funds made, the loan Could cost you more in the long run.
My final advise
if you have any questions, talk to your mortgage broker to help you understand how it all works and what may best suit your personal circumstances.
About Wanda Rowan from Personalised Mortgages
Wanda has been in the finance industry for over 10 years and services many local conveyancers, accountants, and property professionals as an instrumental referral partner.
With changing lending conditions and more Australians under financial stress than ever before, we love that Wanda is all about helping individuals and families access the right financial solutions.
Big on ethics, always ready to give you the “no-bull” honest answers, and offering a flexible and easy mobile service straight to your door, Wanda is a great local choice.
Click here to see Wanda’s Top 3 Local Choice profile here.
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