For Kiwis, staying on top of our financial matters has never been more important! With the cost of living continuing to rise, Kiwis are understandably finding it tough to make ends meet.
To add to this, rising interest rates could see homeowners having to pay much more on their home loans! As much as $1300!!
We know all of this can feel stressful. But don’t worry. We’ve got you sorted!
We’re here to break down what’s happening in the market AND the top tips from the experts on how you can save money on your home loan!
Let’s dive in!
What’s happening?
Canstar, a finance experts company, has done some research which has revealed that homeowners will face increased costs for their home loans due to rising interest rates.
The research dived into the most common scenario, the severe impacts of interest rates increasing for Kiwi first-home buyers with a 80% home loan on a $1.2 million dollar property, spread across 25 years, within the areas of Auckland, Wellington and Tauranga.
The research found that ““Home rates are tracking up and fast. Average households on one-, two- or five-year fixed rates [coming up for renewal] face increases of between $900 and $1300 a month,” says Jose George, general manager of Canstar.
That’s right, it could cost you a whooping $1300 more a month on your home loan!
Many Kiwis will be facing this reality soon. As George says, “Around 50% of mortgage holders are due to roll off fixed rates this year and the financial shock for them will be significant.”
“The blow will be harshest for those who bought at the top of the market and took on home loans at historically low interest rates,” says George.
It’s tougher now too as rising inflation will severely impact the ability for Kiwis to find extra money to pay for their home loans. Kiwis are already too busy trying to pay for the groceries and fill up their cars.
“The Government’s temporary relief measure on fuel taxes will help many struggling with household bills, but it’s impossible to know how long the global turmoil will affect prices across many essential goods,” says George.
It’s clearly a tough situation for Kiwi homeowners at the moment. That’s why you should spend some time now to figure out how to save as much as possible. Following the below steps could save you tens of thousands of dollars over the life of your home loan!
Here are the saving tips from the experts!
Talk to your bank or mortgage advisor
The first thing you should do is talk to your bank or mortgage advisor to see if you can get a discount on your home loan. Homeowners may find that their banks are willing to offer a cheaper rate to avoid losing customers to competition. Challenge the banks but also be realistic about what you can get. If you’re unsure, you can get advice from an independent mortgage adviser. At the end of the day, even a small amount off your current rate could save you heaps over your 25 or 30 year term!
Use your equity as leverage!
See if you can get a discount if you’ve built up equity! Equity is the difference between your house’s market worth and how much you owe on your home loan. If you’ve got more equity now you will appear more “bankable” as you’re less of a risk should house prices crash. So it’s worthwhile to check out your local council valuations to see how much equity you might have. Go to your bank and use your equity as leverage for a cheaper rate!
Don’t be lazy!
The best way banks can make money is when people are lazy. Make sure NOT to let your fixed rate home loan roll over to a higher floating rate. “Our research showed that rolling over from an average one-year rate to an average floating rate would cost an extra $477 a month, on our example property,” says George. Reach out to your provider before your fixed rate ends and you may be able to lock in a new rate- saving you a lot of money!
Split the payments in two!
Split your repayments into two, so you’re paying fortnightly! This is a great tip as there are more than four weeks in a month and you often spend more without even realising. “This little tweak can save nearly $7000 in interest payments on our example mortgage,” says George. But make sure to ask your provider to split your monthly payments in half rather than going on a fortnightly schedule- as the latter won’t save you money!
Pay a little bit extra
Putting a little bit more towards your home loan can save you heaps! “Skip one fancy dinner over the month and you’ll save more than $20,000 over the term of the loan,” says George. Just make sure that your home loan is set up to allow for overpayments without incurring penalties. Whether that’s putting part of the loan on a higher floating rate, having a flexible loan that allows for repayments or having a revolving credit portion of your loan. A little bit goes a long way!
Challenge your provider
Sometimes you can save a lot of money by switching banks! But you may be required to provide a registered valuation report that can cost you $1000. So before you jump ship, think about approaching your provider to see if you can get a better rate!
Be the early bird!
Make sure to get in as quick as you can to re-fix your home loan! Take advantage of being able to re-fix your home loan six weeks early so you don’t miss out on getting the lower rates!
If you implement all these steps into reviewing your home loan, you could save a great deal! “A few minutes of research and a call to your home loan provider could work wonders for your financial future,” says George.
How can I save even further? Easy, use Money Compare!
It’s a tough time, so you’re likely trying to find all the different ways you can save! Luckily you can go one step further with Money Compare!
At Money Compare, you can compare your financial plans. Whether it’s home loans or house insurance or your Kiwisaver or car insurance, we’ve got you covered! We’ll help you find the best plan for your specific needs and make sure that you save heaps of money!
But wait there’s more!!
We know how tough it is with the cost of living continuing to rise- so we’ve got you covered to save on your other household bills too!
Jump on Broadband Compare or Power Compare to compare broadband and power plans! You’ll be able to find a cheaper plan that’s right for you! This will help you pay back your home loan in no time!
Great! How do I compare?
It’s super simple to compare!
Just hop onto Money Compare, Broadband Compare or Power Compare. Enter some details, select filters that match your preferences and then you’ll see all the different plans available to you. All displayed side-by-side for you to compare!
Alternatively, if you’d rather chat to a kind human, then give our friendly customer support team a free call on 0508 22 66 72. They’ll help you find the perfect plan to save you money!
So as interest rates and the cost of living continue to rise, it’s never been more important to save. Follow these steps from the experts and make sure to check out our comparison websites!
Good luck homeowners!
