As property owners are aware, interest rates are rising. If your fixed term mortgage is coming up for renewal, you may be feeling anxious about what your repayments could look like once your current rate ends.  If you have a floating rate, your rates will also be increasing.

There are some options available that you can discuss with your lender if you face unforeseen or significant financial hardship.

Mortgage holidays

A mortgage holiday is a temporary break from making mortgage repayments; these are generally given for a six-month period. The break can either cover both your principal and interest payments, or cover just your principal payments. It’s important to understand that interest on your loan will generally continue to accrue.  If you opt for a total payment break then interest will accrue on both the principal and the unpaid interest as it accrues; make sure you discuss with your lender before committing to this.

Extending your mortgage term

Lenders can also extend the term of your loan.  For example, if your current mortgage is due to be repaid in 10 years, you may be able to push it out to 15 or 20 years.  This has the effect of reducing your weekly or fortnightly principal repayments.  Remember, however, that you will end up paying more in interest in the long run. Make sure you discuss the implications of this fully with your lender.

Talk to a mortgage broker

Before you re-fix or float your interest rate, do talk with a mortgage broker.  Mortgage brokers aren’t just used when you are looking for finance to purchase a property.  They can also compare interest rates offered by other lenders and can negotiate on your behalf.  When working with a mortgage broker there is no direct cost to you for using their services; most of the time the lender will pay your mortgage broker’s fees.

Give us a call

If your interest rate is coming up for renewal and this is causing you undue stress, come and see us to go over your options before talking with your lender and/or your broker.  We are here to help.  Call us on 0800 440-999 or email us on info@bmc-law.co.nz to make an appointment.