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Rising inflation and growing interest rates both in Malaysia and across the world continue to impact the housing market and in turn, mortgages. Looking at inflation or interest rates in isolation might spark ideas about how to approach your own financial situation, such as adjusting your mortgage payments.
But single steps like this may not provide enough relief from the combined impact of the economic forces at play.
Your goal should be to conduct an end-to-end review of your affairs and build the financial nous to adjust the settings as the need arises. Your annual mortgage financial check-up should encompass everything from debt, cash flow, mortgage reset and more.
The following steps will help you take stock of your finances and consider your mortgage options while putting you in the best position to weather any economic turbulence.
Examine the structure of your home loan and what you can do today to prepare for rising interest rates. If you are on a floating rate loan, use a loan calculator to assess what payments will potentially be when your prevailing interest rate ends – this will help you understand the impact to your monthly repayments and plan accordingly. This could be done by either paying down the debt or saving more before the prevailing rate expires. Start talking to your lender now about the options for restructuring your current mortgage or review the type of mortgage options available.
Always pay off your debt with the highest interest first. Where possible, align all the due dates and set a reminder to ensure payments are made promptly to avoid incurring any late payment fees or overdue interest charges. Mortgages or home financing tend to be more acceptable debt to hold because of their lower interest or financing rates.
If you have unencumbered properties or low Loan-to-Value ratios, consider applying for a home equity loan or refinance your property with full cash out. It will allow you to draw cash from existing properties to ease the temporary strain on your cash flow. Keep in mind that doing so carries the same risks and requires the same financial discipline. If you lose sight of your financial goals, you may end up right back where you started, or even worse off financially.
Borrowers with high-interest debt may be able to consolidate their balances into one lower-interest alternative. Not only can that save money in interest payment every month, but it’s typically easier to pay one bill with a single due date, than managing several due dates a month. You can consolidate your outstanding bills or debts with high interest rates through a balance transfer programme that most banks offer.
A survey that HSBC conducted indicated that customers like a flexible home loan, especially one with the ability to reduce interest obligations in times when they have surplus cash. This is preferred instead of placing their investments in time deposits which usually yield lower interest.
Such a loan facility will allow the customer to be more in control of their finances and also provides them with the flexibility of withdrawing the surplus cash in times of need. This surplus can also provide consumers with a buffer when their monthly repayment increases and act as a form of early savings for such unpredictable situations.
HSBC HomeSmart is a home loan that offers the flexibility to prioritise what is most important to you. It has the transactional flexibility of a Current Account with daily interest calculation. Customers can deposit excess funds to save interest and shorten the loan tenure. Customers can also withdraw excess funds anytime without any charges. As an added advantage, customers can consolidate their outstanding borrowings with high interest rates through a balance transfer programme or mortgage refinancing facility. Customers can apply for mortgage refinancing with a top up and cash out option for loan consolidation, and also benefit from zero moving cost, up to RM15,000 (HSBC will absorb the stamp duty, legal and valuation fees for loan documentation).
Scan the QR code to find out more on how you can apply for HSBC HomeSmart.
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