With the RBA lifting its benchmark interest rate by 1.75 percentage points since its first rate rise in May, many investors may be getting jittery.

Investors do need to keep a cool head in these times, and one of the ways of doing this is to actively look at how you can reduce the impact.

Know your finances

Forewarned is forearmed, or so the saying goes, so know what your interest rate is, and how rate rises will affect you.

Understanding your interest rate and monthly repayments, will enable you to properly assess on how the recent raises will affect your finances and cashflow, and then you look at options to minimise the effect.

1. Are you with the best finance provider?

Once you know your interest rate, you can then ascertain whether the rate you’re on with your current lender is best on the market for your financial situation. Depending on where you are with your current provider’s loan conditions, you may be able to negotiate a better deal; you may be able to get a lower interest rate if you leverage existing equity to reduce your loan to value ratio.

Alternatively, you may want to shop around and see if you can change to another lender with a more competitive rate.

Reviewing the loan structure and repayment type may also reduce the impact of a rate rise; speak to a financial specialist who can advise accordingly. If you are thinking of refinancing, contact your accountant to find out what the tax implications are.

2. Make additional payments on your loan

If your finances allow, make some additional payments to your mortgage; if you’re overpaying your mortgage, there is less capital on which to charge interest on, and it may reduce the duration of your loan.

Furthermore, you’ll be building redraw into your loan, and in doing so, you’ll create equity sooner – this could be beneficial in the long run if you want to refinance, for example for another investment property, in a few years’ time.

However, do read the small print in your lender’s T&C’s; some mortgage products may put a cap on the amount you’re allowed to over pay on, and you may incur fees if the repayment is above this amount.

Being as you’re looking at loans and finance, take a look at all loans, credit cards and any other lines of credit you may have. The general rule of thumb is to prioritise higher interest rates, so speak to your advisor to find out what works best for you.

3. Use your offset account efficiently

For borrowers who have an offset account, now is the time to look at how using it more efficiently. Making extra payments into it will again effectively reduce the amount of money borrowed, and hence the amount of interest charged.

The beauty is, you’ll have access to extra funds should you need them at a later date. This may include covering additional interest charges if any.

But don’t forget, if you do take out money out of your offset account for whatever reason, you’ll need to factor in your payments may increase because you’re now paying interest on a higher lump sum.

4. Keep your tenants happy

The last thing you want is for your tenant to leave, and for you to incur further costs associated with finding a new tenant, or for the property to sit empty for a period of time. Make sure you’re addressing issues promptly and if you are at the time of renewing tenancies, any rise in rent is appropriate and fair.

This is where a good property manager steps in. We’re always happy to advise our clients on the legalities associated with rent rises, and obviously negotiate issues to ensure tenants are kept happy.

Should you be in the position where your tenant is leaving for other reasons, we quickly find new and quality tenants; our vacancy rates are consistently below the Newcastle average.

We hope these tips help give investors the tools to reduce the impact of interest rate rises; it’s also worth remembering, interest rates are still at a historical low compared to a few years ago, and property investment is a long-term investment.

We’ve been helping property investors and home owners since 1974, and we’d like to help you!

We’re local and family run, and we’re committed to making your property management journey or sales process as stress-free as possible.

With nearly 50 years in the business, we have the experience to help you get the best from your asset.

We’re always here for an informal chat to answer questions, so give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office. Check out our Facebook page for more tips and ideas.