Top tips for those with a home loan
How to spread your interest rate risk
While no one has a crystal ball, worrying and trying to pick the lowest interest rate can be very stressful. Consider these suggestions:
- Splitting your home loan into two or three portions with different fixed terms can help spread your interest rate risk rather than having your entire mortgage coming up for refixing at the same time.
- Keeping a small portion on a floating or variable rate. This can provide flexibility if you want to make extra repayments, receive a bonus, or pay down debt sooner without the restrictions that can apply to fixed-rate loans.
- Review your home loan regularly. Your financial situation, goals, and interest rate environment can change over time, so it’s worth checking whether your loan structure still suits your needs.
- Set up this structure when you first take out your home loan or during your fixed rate review period.
- Talk to your financial adviser or lender. They can help determine the most suitable loan structure for your financial situation.
Review your home loan regularly
- You may have options to pay off your home loan faster. A home loan review may uncover opportunities to increase repayments, make lump sum reductions, or restructure your loan to align with your goals.
- Have you had a pay rise? Can you increase your repayments a little?
- Set up a savings account and make lump sums once a year – money from a bonus or tax refund.
- For some people who are quite disciplined with their money, an offset mortgage or revolving credit is an option to consider (basically using your savings or weekly wage to reduce the interest charged).
Stay informed about interest rates
- Especially if your loan is due for a fixed rate review or you have a floating loan and are looking to fix.
- Often when the Government makes announcements about the Official Cash Rate (OCR) this can have an impact on home loan interest rates.
- If your loan is due for review around the time of an OCR announcement, take notice and seek professional advice to find out what your options are.
If you have any questions or need further information, feel free to get in touch.
This information is of a general nature and is not intended as personalised financial advice. RIVAL Wealth is a Financial Advice Provider (FAP) licenced by the Financial Markets Authority to provide financial advice. Our disclosure document is located at rivalwealth.co.nz or a written copy is available on request
