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by Samantha & Nicole
There has been a lot of discussion about rising interest rates which brings on the inevitable question of  “How will I be able to manage my increased mortgage repayments?” For those on a fixed interest rate, it does not affect you however, if your fixed rate period is coming to an end you need to be able to manage your new repayments. Samcol Finance has a few tips:

1. It may be time to assess your home loan situation. If you are on a variable rate and want the security of being in a fixed rate, then make inquires to your lender about fixing your loan. There can be a fee to change from a variable to a fixed term and this fee will vary from lender to lender.

You need to consider that fixed interest rates are high at the moment and therefore you need to think carefully as to how long you want to fix the term, if fixing your rate is an option. Most home loans can be fixed between one and five years.

But the risk of fixing is if interest rates do decrease, you will be locked in to your current fixed rate. While you may have peace of mind in terms of your repayments you may find it costly in the future to break a fixed term loan.

2. Look at your loan features and make sure you are not paying for things you don’t even use or need, like a cheque or redraw facility or a linked credit card. Most lenders offer a basic loan with few frills at a lower interest rate.

3. If you cannot negotiate with your existing lender and another lender is offering a far better deal, then refinancing is an option. However, be aware, refinancing your loan can cost you money as there could be a breaking fee depending on the type of loan you are in and how long you have been in that loan for. Give your lender a call and see much your breaking fee would be. You may be surprised to find that you don’t actually have one. Be sure to weigh up the savings and consider whether it is worth changing lenders.

4. Another option may be to consolidate your debt. So instead of paying your mortgage, car loan repayments and 17% or more interest on your credit cards, consolidate them and therefore you are only paying one repayment per month. Again, there could be costs involved in consolidating and therefore you need to weigh up if it will actually save you money in the future. The key factor to remember is that once you consolidate your debt, you need to be strict and either decrease your credit card to a manageable limit or simply cut the credit card up otherwise all you are doing is covering up the problem that will no doubt come back to haunt you in six months time.

Posted in financial |
Posted by Samantha & Nicole
16 Jun 2008

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