Practical and highly effective Tips from Global Finance
Are you worried about the seemingly constant increases in interest rates and the impact they have on your mortgage repayments? Many Kiwis are facing financial challenges during the current cost of living crisis in New Zealand. So, we spoke to the Head of Mortgages at Global Finance, Aseem Agarwal, to see if he had any tips on how to minimise the increased burden of mortgage repayments despite recent interest rate rises. He gave us the following advice:
Loan Renewal: Explore Your Options
Firstly, when your mortgage comes up for renewal/ refix of an existing loan, there is an excellent opportunity to reassess your financial situation and explore better options. Aseem was very clear that you should not simply accept what your current bank offers when your mortgage comes up for renewal. He strongly recommends that people take the time to understand their options and try to negotiate with their current bank and compare offers from different banks. Most lenders are quite prepared to roll out the red carpet if you are willing to move your loan. So, if you don’t have any binding conditions on your mortgage, such as having to keep your loan with your current bank for a certain period because you were given some kind of cashback, then see whether you can get better terms through another bank. Aseem suggests comparing the following factors:
Interest Rates
Interest rates can have a significant impact on your mortgage repayments. Even a slight difference in rates can result in substantial savings over the life of your loan. So, look for a bank that offers lower interest rates. Keep in mind that interest rates can vary widely between fixed-rate and floating-rate mortgages. While fixed-rate mortgages offer stability and predictability because the interest rate is constant over a predetermined fixed period, floating-rate mortgages fluctuate based on market conditions. Therefore, if the rates move in the lower direction, floating rates can save you money.
Cashback Opportunities
As an incentive to attract borrowers, some lenders offer a one-time lump sum payment which is called cash back. The amount of the cashback varies depending on the lender and loan product: it is usually a percentage of the total loan amount. For example, a lender might offer a cashback of 1% on a $300,000 loan, or $3,000 in cash. This is paid out after the loan is disbursed or upon meeting specific conditions set by the lender. Borrowers can use this as they wish. For example, it can be put toward covering moving costs, home improvements, or reducing the principal of the loan, which can help lower the overall interest paid over the life of your mortgage.
“We encourage you to reach out to our Global Finance team for answers, support, and guidance. We’re here to help you to find the most favourable mortgage solution, including exploring potential cashback opportunities.”
Create a Solid Budget with the Help of a Financial Advisor
Having a well-planned budget makes such a difference in the effective management of mortgage repayments. If you’re looking for ways to lessen financial strain, Aseem recommends sitting down with a financial advisor to see how they can help with ongoing budgeting:
Determine Ongoing Repayments
A financial advisor can help assess your current financial situation and calculate your current and future income and expenses. They will help you calculate ongoing repayments that fit comfortably within your budget.
Understand Interest Rate Outlook
As we have so clearly seen recently, interest rates are subject to market fluctuations. Discuss interest rate trends with an advisor to determine what would be an optimal loan term. Having a thorough understanding of interest rate projections can help you avoid being locked into a high rate when the market rates are expected to drop.
Consider Fixed vs. Floating Rates
Depending on expected interest rate movements, consider whether a fixed-rate or floating-rate mortgage or mixture of these two is more suitable for you. A financial advisor can help you understand your risk tolerance.
Regularly Review Your Mortgage Plan
Once you’ve fixed your loan, it’s important not to just forget about it. Interest rates and financial circumstances can change over time. Hence, Aseem from Global Finance recommends keeping informed and taking some initiative. Staying up to date with economic news and trends means you can be prepared for any potential changes in the market.
Periodic Reviews
Have an annual or six-monthly or annually review with an advisor to assess the effectiveness of your mortgage plan and make necessary adjustments if needed. Regular reviews help you stay on top of your financial goals and ensure that your mortgage continues to stay in line with your changing circumstances.
Consider Additional Repayment Options
Making additional repayments on your mortgage can be an effective way to reduce the overall interest paid and potentially shorten the loan term. Depending on your lender you may have the flexibility to make extra repayments without incurring penalties.
Stay Proactive
If your mortgage plan is not working for whatever reason, don’t wait until the end of the loan term to fix any flaws. Aseem from Global Finance is of the opinion to be proactive so you can take full advantage of market conditions or potential cashback benefits and stay ahead of any challenges that may be on the horizon.
“At Global Finance, we offer “Mortgage Genius Plan” a very efficient and effective money management tool designed to put you in control of your mortgage repayments”. Under “Mortgage Genius Plan,” Global Finance team provides regular loan reviews, and support and handles all the mortgage negotiations for you and keep you informed regularly as desired by you.
Contact Global Finance for Expert Mortgage Guidance
Managing your mortgage repayments amid rising interest rates doesn’t have to be overwhelming. The team at Global Finance is here to help you through these challenging times. They can help you explore your options, so you can choose the best structure for your mortgage and reach your financial goals faster than you thought was possible.
Contact Global Finance today on 09 255 5500 or send an e-mail to info@globalfinance.co.nz and let’s work together to make your mortgage journey smoother and more affordable.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.