If you have a variable-rate home loan, one thing that can save you some stress is a simple chart like this:
Monthly Repayments For A $760,000 Home Loan On A 30-Year Term*
|Interest Rate||Monthly Repayment|
*Note that if you have benefits such as offset accounts, they may affect your monthly repayment.
When banks assess whether a potential borrower can afford a variable-rate home loan, they work out exactly how much any increase in interest rates will affect the repayments. Homeowners should do this, too.
By working out ahead of time what changes in rates will mean for your budget, you’ll save yourself the headache and stress of doing the maths after each RBA announcement. You’ll also be able to make informed decisions at the time of settlement about how you will budget if your homeownership costs increase.
Let’s look at how you can work out what each rate increase will cost you and prepare a chart for easy reference, using the Home Loan Experts repayments calculator. The page includes a video tutorial on how to use it. You can also read and follow the steps below for results in seconds:
- 1. First, visit our repayments calculator page, here.
- 2. Enter the total amount of your loan, the term of your loan, your interest rate and the frequency of your repayments into the calculator. Push the NEXT button.
- 3. On the ‘Contact a Mortgage Broker’ screen, answer the two questions yes or no, as you please. If you just want the calculator results, select no for both questions. Press SUBMIT. (Note: if you answer yes to either question, the calculator will ask for more information in order to complete your request.)
- 4. On the results page, the Home Loan Experts calculator will reveal your repayment and a chart that displays how your total balance and principal balance will change over the life of the loan.
- 5. To see how a change in interest rates will affect your repayments, simply scroll to the bottom of the page, click RE-CALCULATE and enter a different interest rate. The RBA typically raises and lowers interest rates in increments of .25 percentage points (also known as 25 basis points) so try increasing the interest rate that amount. For example, if your current variable rate is 3.00%, enter 3.25% next.
- 6. Keep increasing the interest rate you enter into the calculator to fill out your chart.
- 7. Extend the chart until you see what your monthly repayment would be if interest rates were to raise 5 full percentage points above your current variable rates. This will give you a large range for reference before you would need to make additional calculations.
- 8. You can refer to your chart any time for budgeting or just peace of mind.
Home Loan Experts’ Mortgage Brokers Help With Rising Rates
Rising interest rates are an unavoidable circumstance. Fortunately, if you have an expert mortgage broker on your side, you will be well prepared for any rate rise in the future. At Home Loan Experts, our mortgage brokers can prepare you for a rate rise by refinancing or making changes to your home loan. Call us on 1300 889 743 or enquire online for free today.