Things to Consider When Interest Rates Rise
These days, the most common question I get from borrower is, “what happens if interest rates rise? Let me answer this question with more specificity. Well, once you are done with the process of getting a home loan, you will be having a clear idea about your borrowing capacity as well as about your monthly repayments. However, it can be problematic when interest rates suddenly go up leaving borrower with heavy mortgage repayments that are no longer sustainable for them.
Don’t frown, follow our expert advice and manage your finances well even in this tricky situation.
It’s time to access your savings – If you have been a smart borrower despite of taking home loan; you must have able to maintain some savings. Therefore, this is the right time to tap into the savings fund to top up your repayments. This will serve as a quick relief but it can only be a short-term option. In case you don’t have any savings then it’s high time to implement one.
Consider Refinancing – When you are finding it tough to meet your home loan repayments, refinancing is another great option. With refinancing, you can change your home loan option and settle for a more suitable mortgage that is in line with your current needs. This option is ideal especially in the case when your lender is raising rates while others are not.
Do you know what’s the most reported mistakes of all when it comes to refinancing? The overwhelming options of lenders leave people perplexed. This is where a mortgage broker can provide best assistance. A broker can help you make the best choice.
Discuss with your current lender – When finding it challenging to meet your mortgage repayments, it is good to break the news to your current lender. Give your existing lender, a clear picture about your financial situation so that they can provide you with best options he can offer. Your lender may provide you financial assistance for the time being or if you are fortunate enough, the lender may put your repayments on a short-term break giving you enough breathing space to bring the things back on track.
There is no read-mix approach that can help you in anticipating a change in interest rates. However, I ‘m sure keeping a wary eye on this development going forward along with a pricing strategy aimed at timing an anticipated change in rates will ease out the things for you.