With mortgage rates rising faster than expected, you may be considering the next steps to take on your home ownership journey. So here are some potential “New Year’s resolutions” for home owners to have; as always, we’re here to answer your questions, big and small.
Paying off the mortgage faster
As you know, any extra money you can put towards your home loan payments can shorten the life of your mortgage – and reduce the overall interest costs that you’ll pay. So, if you can afford to bump up your mortgage repayments and pay more than the minimum, it’s something worth considering.
Of course, now that mortgage rates are trending up, paying more than the minimum may require a closer look at your budget. If you have a fixed mortgage rate that’s due to expire in the next few months, for example, you’ll need to decide whether to refix it, for how long, and if there’s still room in your budget to pay a little extra (each month or in lump-sum amounts).
Do you have capacity to pay extra? Depending on the terms and conditions of your loan, you could:
- Refix and choose a regular repayment amount that’s higher than the minimum: keep in mind that lenders only allow extra repayments on a fixed mortgage rate up to a certain limit, before charging an early repayment fee (get in touch to learn more);
- Wait until the fixed rate expires and make a lump-sum extra payment while on a floating rate, before fixing it again: this would allow you to pay any extra amount you like, without incurring a fee;
- Keep a portion of the mortgage on floating and fix the rest, so you can make extra repayments as high and frequent as you like on the floating part, without any fees involved.
Not quite sure where to start? If paying off your mortgage faster is one of your New Year’s resolutions, we’re here to help you understand your options.
Renovating the house
Over the past few months, you may have spent a long time at home, noticing all the things that you’d like to update or fix. Is a home renovation on your to-do list for 2022?
Whether you’re looking at renovating to sell or just to improve the space while you live in it, sprucing up the house can be a great way to add value and build equity. Depending on the size of your project, there can be different ways to fund it – including a mortgage top-up.
If you’ve been living in your home for a few years, you may have built up good levels of equity in your home. As its name suggests, a mortgage top-up allows you to add a bit more to the amount you owe on your home loan, and use that money to fund a big-ticket item – like a new vehicle or a home renovation.
Usually, mortgage top-ups have lower interest rates than personal loans, and that’s why they can be a convenient option for home owners. But remember: even a low rate can add up to a big amount over two or three decades. The key thing is to focus on repaying the top-up amount within a few years, essentially treating it as a personal loan.
Like to learn more? Get in touch: we can help you understand if you qualify for a mortgage top-up and what the lender may require (possibly including quotes from construction companies).
Growing your property portfolio
Are you considering purchasing a property investment in the new year? While we can’t offer advice on the right property to purchase, or whether property investment is right for you, we can answer all your mortgage-related questions.
For example, if you own your own home, you might be able to use your existing equity as the deposit for an investment property. And before starting the property hunt, it’s important to work out how much you can afford to borrow. This calculation is based on a number of different factors, including (but not limited to) how much debt you have and your income levels. Once again, we’re here to guide you every step of the way.
Like to talk?
Can we help you make some of your New Year’s resolutions a reality? Please don’t hesitate to contact us: we’re mortgage experts.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
Link Financial Group Ltd trading as Mortgage Link and Insurance Link FSP 696731 holds a licence issued by the Financial Markets Authority to provide financial advice. Please visit https://mortgagelink.co.nz/available-disclosure/ for more information and Disclosure information.
