Thinking of borrowing money? Here are some top finance tips to consider and how to make the most of a low interest rate environment:
- Research the market and make an educated call on whether a fixed or variable rate loan is best suited to your circumstances. Interest rates are dictated by a number of factors including economic cycles and picking those cycles is never easy. Certainty of home loan repayments for a set period – achieved by fixing your loan – may be an influencing factor in your decision process.
- Consider keeping your repayments at the same level, even during the low interest rate environment. While it is tempting to reduce your loan installments when interest rates fall, keeping your repayments at the same level will pay down your debt faster and could save you thousands in interest over the long-term.
- Engage a trusted mortgage advisor to seek advice from. There’s more to consider than just the headline interest rate and a mortgage adviser can provide advice on the home loan product that’s best for your individual situation. Ideally, develop an ongoing relationship with a broker to continually review your situation.
- Take advantage of lower home loan repayments by using the extra money to pay-down debts, such as personal loans or credit cards, or make voluntary contributions into your superannuation fund.
- Don’t over-commit or overextend yourself financially, which can be a temptation in a low interest rate environment. Work out what your home loan repayments would be if rates were higher, and ensure you live within that margin.
- Review your debts and consider consolidating high cost debt into your home loan. While home loan interest rates are at record lows, this doesn’t extend to credit cards, personal loans and overdrafts. If you do this, be careful not to draw on the debt you have just consolidated.
- Think about borrowing more against your home to improve your lifestyle, such as home renovations. If you do borrow against your home for items such as furniture and cars, it pays to match your increased repayment amounts to the life of the item you purchase. That way when you consider upgrading the item, you should not owe any money on it.
- Seek advice on whether an investment property is within reach. The current combination of low borrowing costs and steady growth in house prices are two good investment enablers. A finance broker will be able to steer you on the right course on lending products available for such a purpose.
If you need assistance with borrowing for your next property, feel free to get in touch with me at firstname.lastname@example.org or call (08) 8409 4333.
Malcolm heads up the Finance Broking and Advisory team at William Buck. He has a 30 year background in Banking and Finance and delights in assisting clients in structuring and procuring the right finance at the best price.