You may find you’re better off putting your entire mortgage into a fixed loan (where the interest rate stays the same for a fixed period) or you may prefer splitting the loan between fixed and floating rates.
With a fixed mortgage you will be safe from fluctuating interest rates – at least in the short term. But you still need to plan for when it expires.
Over the next two years more than a third of fixed home loans are up for review and with last month’s Official Cash Rate increase, it’s fair to say we can expect interest rates rises in the near future.
Even small interest rate rises can have a significant effect on your home loan and ability to pay off your mortgage – especially if you’re already on a tight income. An increase of just 1-2% may mean having to pay an additional $100 or more in repayments a week.
Setting a budget will help you take stock of your financial situation. Check out the budget and mortgage calculators on the Retirement Commission’s free, independent personal finance website
www.sorted.org.nz to see the real cost of your mortgage. You may also find you can pay your mortgage off sooner (saving yourself thousands in interest payments).
While you’re there take a look at the Sorted KiwiSaver Decision Guide which can help you decide if you are better off to put 4% of your pay into KiwiSaver now and get the incentives, or to delay joining and pay off your mortgage or credit card debt faster.
With a little planning it is possible to pay off debt sooner, beat rising interest rates and save.
