With the Reserve Bank of Australia recently increasing the cash rate by a further 50 basis points to 0.85 % – the largest jump in 22 years – many property owners, home owners and investors alike, will be thinking about reviewing their finances.

Check the terms of your finance

Whether you’re a home owner or property investor, first and foremost check the terms of your mortgage with your provider; higher interest rates, may not necessarily mean loan repayments increase immediately.

Establish what your current rate is before you start crunching the numbers.

Regardless of whether your mortgage payment is immediately going up or not, property owners may want to start looking at ways to better manage their money and limit the impact of rising interest rates, and general cost of living.

Here are some tips to help:

Reduce your spending

While it may not be easy to cut down on the amount of electricity, gas and fuel you use, particularly in these colder months, look at where you’re spending your money elsewhere to see where cuts can be made. Review your subscriptions; are you getting your money’s worth for the gym or entertainment channels such as Netflix? Now might also be the time to review your phone and internet plan, and look for better deals in insurance and healthcare cover.

Now might also be the time to forego that coffee-on-the-run every morning, and to start packing your lunch.

Also, some find shopping with a list helps keep them within budget and buying in bulk often means items work out to be cheaper.

Overpay your mortgage

If you are saving more money than you realise, it might be worth overpaying your mortgage. Depending on the terms of your mortgage, your monthly payments may go down, or you may reduce the term of your mortgage.

Review your saving scheme

Although interest rates have increased, and savings accounts may attract an increase in interest, it might be worth looking at other options.

For instance, if you have an offset or redraw account attached to your mortgage, are you using it to its full potential? The more money you keep in these accounts, the less you pay in interest.

The beauty is, you can access the money from either of these accounts immediately.

Consolidate debt

With credit cards, personal loans and other debts often charging interest rates much higher than your home loan – the average standard credit card rate is over 19% – consider extending your home loan to pay off these debts.

But once they are paid off, don’t be tempted to start spending on your credit card or taking out another personal loan!

Can you increase your income?

For investors, raising interest rates are something we’ve always advised to factor into a property investment budget; while some landlords may be tempted to pass on the rise to their tenants, you need to be sure it’s fair and timely – read our blog about rent rises and why this might not be an option right now.

But investors are in the fortunate position where interest on a loan is a tax-deductible expense, meaning you can offset any increase in interest payments against tax paid.

While you might be looking at other ways to increase your income, such as asking for a pay rise, or taking a second job, renting out a room, or a granny flat if you have one may also be an option.

And if you’ve got capital in your home, and you’re looking at mortgage deals, investing in property might be an option! Vacancy rates are still low, and rents have been steadily rising over the past couple of years.

Talk to a financial specialist and do some number crunching to see if this is a realistic option for your financial situation. Read our blog for guidance on what you can and can’t claim tax for your property investment.

If you are looking for a property management agent, come and talk to us. Our management team consistently outperforms our competitors; because of our marketing and property management strategies, our properties are leased in well under the average time period of other agencies in our area, and our vacancy rate is frequently under the REI average.

We are a family run business and have been in the business for nearly 50 years; we treat each and every one of the properties we are entrusted with like our own, and we are constantly looking for ways to get the best out of the properties we manage.

Find out more about our property management services – give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or call into our Cardiff office.

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