Are You Ready For the Inevitable Rate Rise? 7 Tips to Avoid Massive Mortgage Stress


Owning a home is an integral part of the great Australian dream, but house prices in Australia are some of the highest in the world. Most people can’t afford to pay the entire cost of owning a house upfront, and that’s why a vast majority of Australians have to rely on mortgages to realize the dream of owning a home. 

Unfortunately, this means that they are exposed to market and finance factors that can make the process of servicing the repayments quite difficult, and can cause signifcant mortgage stress.   

The question looms over many homebuyers’ minds… What if interest rates rise?

Right now, we stand at the brink of a huge market shift. The interest rates are bound to rise significantly as the $200 billion Federal Bank of Australia scheme meant to mitigate the effects of COVID-19 comes to an end. 

So, what does this mean for you?

Rising interest rates don’t have to stand in the way of your property investment goals! Below is a rundown of the tips that you can count on to avoid massive mortgage stress.

1. Shop Around for Competitive Interest Rate

Different lenders offer their home loans at different rates. The higher the interest rates, the higher the cost of the loan is going to be. Avoid stress and overpaying by doing some research and finding the lender offering loans at the lowest interest rate.

2. Get Fixed Interest While it is Still Possible to Lock in Low Rates

Interest rates can either be fixed or variable. Variable rates change as the market conditions change, while fixed rates remain the same throughout the repayment period. 

Although variable interest rates can enable you to benefit from decreased interest rates when market conditions are favourable, interest rates can be hard to predict, and you never know what will happen in future. 

To avoid future mortgage stress that may occur if interest rates go up, you can opt for a fixed interest rate on either the entire loan or a portion of the loan. Due to COVID-19, a lot of lenders are offering incredibly low fixed-rate mortgages that you can take advantage of!

3. Use an Offset Account

An offset account works like a transaction account linked to a home loan. The amount of money you have on your offset account can be used to offset what you owe on your home loan. In such a transaction, you will only be charged interest on the difference. That’s why using an offset account can be a big key to saving money and protecting yourself from future market shifts! 

4. Purchase an Investment Property

Purchasing an investment property now, and structuring the property correctly for your financial situation can have a profound effect on how interest rate rises may affect you. For instance, a typical investment property can see a reduction on your home’s mortgage of 5 to 10 years over the term of a loan if you utilize all the benefits available to you, meaning when interest rates rise in the future, you already have a significant headstart and well ahead of the “8 ball” on repayments.

5. Review Your Household Budget

One of the best ways to protect yourself from future stress when interest rates rise is to work on paying down as much of your home loan today as possible!

How much money do you earn and spend every month? 

If you’re ready to get more aggressive on paying down your mortgage, the best way is to do a serious review of your household budget. Are there places you could tighten up your expenses? Is there extra money available that you could allocate towards paying down your mortgage?

6. Adjust Your Finance Structure Correctly

Many homeowners leave a lot of money on the table simply because they don’t structure their finances in the most advantageous way. It’s important to review your entire finance structure regularly and make sure it fits your goals, wants, and needs. Simply adjusting an interest rate, adding an offset account, paying off your mortgage more regularly or making additional repayments can all have a profound effect on your financial outcomes. All simple steps but often put in the “I’ll do it tomorrow” basket. 

When the structure is set correctly with the right type of property, the right loan and finance structure, and the right advice, you can set yourself up for a comfortable, stress free future.  

If you don’t know where to start, see tip number seven!

7. Seek Professional Advice

When you’re working with a big asset like property, even small mistakes can cost thousands.

Nobody buys an investment property wanting to lose money, but it happens. According to CoreLogic, 1-in-10 properties in Australia are sold at a gross loss.

Having the right knowledge backing you can make all the difference when it comes to protecting yourself financially and setting yourself up for a comfortable future. 

We are here to help!

As a team, we can assess your current situation and help you potentially save thousands off your mortgage relieving stress and overall help you move towards your goals.

Adding an investment property can have real advantages. Our process is as easy as 1, 2, 3, and free to you.

  1. We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
  2. From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
  3. Lastly, we find the perfect property to make those objectives a reality!

Our average client sees a huge reduction in their mortgage term, fantastic tax benefits, and most importantly, more money each week in their back pocket while building wealth for a prosperous future. 

You can be the same. 

Schedule a free consultation with one of our licensed property specialists HERE.

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