After six interest rate rises since October last year, the past couple of months have been somewhat of a relief for mortgage holders, with the Reserve Bank of Australia keeping interest rates on hold at 4.5 per cent. But rates won't stay on hold forever and the RBA has already said that it will lift rates in August if it is uncomfortable with inflation levels.
For those of you dealing with a mortgage, such uncertain conditions can often be tricky and usually require some forward planning.
It is generally best to start considering your mortgage when your situation is relatively comfortable and not under stress. At this point, an honest assessment of your household spending is a great way to arm yourself against future pressures. By way of example, a rise in interest rates to 4.75 per cent would add $48 per month to a $300,000 mortgage. By understanding the breakdown of how much you are spending on luxuries compared with necessities, if times get tough you will already know what you can start to cut back on, easing difficulties quickly.
No matter how comfortable you are with your mortgage repayments, it is generally always a good idea to contribute more to your mortgage when rates are lower. You will appreciate these extra contributions if interest rates go up and you find yourself not able to deal as well as you thought you would. If on the other hand interest rates don't affect you too much, then these extra payments will simply enable you to pay off your mortgage more quickly, saving yourself interest in the process.
Many people often get themselves into a spot of bother with their mortgage. Normal life situations, such as job loss, can arise which understandably make it difficult to meet mortgage obligations. In these circumstances, the best course of action is usually to sit down and explain the situation to your mortgage lender. Depending on your lender, and the specifics of the situation, there could be a variety of options available to make things easier for you.
In any case your lender will appreciate the fact that you have come forward to explain the situation and should work to determine a solution that suits everybody. After all, a happy mortgage customer is generally always in the best interests of a lender.
Although interest rates can pose some uncertainty, there are ways to handle your mortgage in a manner that isn't too stress-provoking. I would encourage all mortgage-holders to stay on top of things and build equity wherever possible. Century 21 Home Loans may also be able assist with your home finance questions - for more information, just take a look at the website - http://www.century21homeloans.com.au