28 Jul What to do if interest rates go up
There has been a lot of talk in the media lately about the possibility of interest rates going up, with some commentators and articles such as Broker News saying that a hike in interest rates would trigger a crash.
If you’re an owner occupier or you’re planning to sell your property, this will be the worst possible news you can imagine. So, what should you do if interest rates increase? How can you minimise the effect that an interest rate rise has on you?
Review your mortgage
If you’ve just taken out your mortgage then it may be hard to refinance, however if you’ve had your mortgage for a long time, it’s possible that since you took out the loan, interest rates have dropped but you might still be paying higher interest rate. Explore the possibility of refinancing to save on your mortgage repayment. A 1% reduction on a loan of $350k will save you $3500 per month and allows you to pay off the loan faster.
Explore the possibility of getting a boarder for a room. A boarder will help with the mortgage and you will also feel much more secure if you go away on holidays. They’ll be able to look after the place when you’re gone. You can get a boarder through student exchange organisations, or just list an ad for a flatmate.
Another option if you don’t want to worry about living with someone long term is to use Airbnb and just rent out the room short term. The wonderful thing about this option is that you can often make more in a couple of nights than you would in a week if you were renting the place out and you’ll have more privacy and more money to cope with rising interest rates.
Make better use of your space
If you have a big land or house, you can take advantage of it by either add an room to your existing dwelling or getting an approval to construct a granny flat and lease it out. This will help with your cashflow and budgeting if interest rates rise because you’ll have another source of income and utilise the previously wasted land that wasn’t generating an income.
There are so many other ways that you can cope with a hike in interest rates, however these are the ones that will have the best impact. If you find yourself struggling then give our team a call for some personalised advice.