It has been a very challenging past few years with Covid mixed with high inflation and increased interest rates. Recent economic data has no doubt painted us a pretty rough picture. Although the bright side is that historically, data did show a downturn cycle eventually turns. The question is, how can we survive the storm before the calm eventually?
- Be Prepared as Early as Possible
Proactive planning and effective risk management are critical, especially for those homeowners or property investors whose mortgage fixed interest rates (much lower fixed rates) are coming up. Do talk to your trusted financial advisor or bank staff to find out your options and relevant costs, if any. Last blog, we talked about DTI, which potentially will place restrictions on both existing and future borrowing capabilities. The earlier you can review your current financial situation, the better prepared you are to face those changes in the future. - Refix or Refinance: Worth the Effort to Investigate Further
When you are choosing a fixed term, remember that the lowest rate is not always necessarily the best option for your personal financial situation. Also, you will need to be fully aware of the risk of break fees/penalties. If you have had your mortgage with your current bank for three or four years (depending on the bank cash contribution agreement details), you are likely eligible to refinance. Most major banks offer between 0.6% and 1% of your total mortgage amount – meaning you could get thousands back to help with your cash flow. It also provides a good opportunity to change up the lending structure (such as extending the total term or consolidating different loans into one, etc.) to ensure it fits better into your current financial situation. However, it is a bit of a process and could involve other costs or fees, such as solicitor fees, etc. We highly recommend talking to a trusted financial advisor or bank staff to find full details before making any decisions. - Interest Only Option
Major banks such as ANZ & BNZ recently introduced a short-form interest-only application process to help their existing clients who might need 12 months principal relief to release their financial pressure temporarily. Feel free to contact us to find out the full details, as each bank has slightly different requirements when they assess the interest-only application. - Budgeting Household Outgoings by Reducing Uncommitted Expenditure
With a mindset of taking control of what we can do to help survive in mind, budgeting the current household better by making a few changes around the daily routine, such as cooking at home more, renting out spare room(s), selling unused or unwanted items via Trade Me, walking more rather than driving. Remember, small things do add up! - Seeking Support When Facing Difficult Decisions Such as Selling Assets
When you are facing difficult decisions, such as selling a home or assets, it is important to surround yourself with a trusted real estate agent, financial advisor, legal advisor, and positive, close family and friends.
As always, we are here to support, willing to listen to your financial situation, and work out potential option(s) with you together!
Disclaimer: We recommend that you seek personalized professional advice from your trusted adviser before taking any action, as each applicant’s situation can vary. The above content is only general commentary.
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