Why a Mortgage Balance Sheet Could Be Key to Overcoming Economic Turmoil
by Renee Bullock-Cann, Head of Wealth and Personal Banking, HSBC Malaysia
Rising inflation and rising interest rates in Malaysia and around the world continue to impact the housing market and, consequently, mortgage lending. Looking at inflation or interest rates in isolation might spark ideas for how to approach your own financial situation, such as adjusting your mortgage payments.
But single measures like this may not sufficiently alleviate the combined impact of the economic forces at play.
Your goal should be to conduct an end-to-end review of your affairs and create the financial conditions necessary to adjust the parameters as needed. Your annual mortgage balance sheet 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.
Review your mortgage type
Take a look at your home loan structure and what you can do today to prepare for rising interest rates. If you’re on a variable rate loan, use a loan calculator to assess what the potential payments will be when your prevailing interest rate ends – this will help you understand the impact on your monthly repayments and plan accordingly . This could be done by paying off debt or saving more before the prevailing rate expires. Start talking to your lender now about restructuring options for your current mortgage, or review the type of mortgage options available.
Prioritize and take stock of what you owe
Always pay off your debt with the highest interest rate first. Where possible, align all due dates and set a reminder to ensure payments are made promptly to avoid incurring late payment fees or late payment interest. Mortgages or home financing tend to be more acceptable debts to hold due to 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 refinancing your property with a full cash out. This will allow you to withdraw cash from existing properties to relieve temporary pressure on your cash flow. Keep in mind that this carries the same risks and requires the same financial discipline. If you lose sight of your financial goals, you could find yourself back where you started, or even worse off financially.
Look for debt consolidation to reduce the cost of financing
Borrowers with high interest rate debt may be able to consolidate their balances into one low interest rate alternative. Not only does this save money in interest payments each month, it’s usually easier to pay a bill with just one due date than to manage multiple due dates per month. You can consolidate your unpaid bills or debts with high interest rates through a balance transfer program that most banks offer.
How HSBC HomeSmart can help you
A survey by HSBC indicated that customers like a flexible home loan, especially one with the ability to reduce interest obligations when they have excess cash. This is preferred instead of placing their investments in term deposits which generally pay lower interest.
Such a loan facility will give the client more control over his finances and also give him the ability to withdraw excess cash when needed. 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 prioritize what’s 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 term of the loan. Customers can also withdraw excess funds at any time free of charge. As an added benefit, customers can consolidate their outstanding loans with high interest rates through a balance transfer program or a mortgage refinance facility. Customers can apply for a mortgage refinance with a reload and withdrawal option for loan consolidation, and also benefit from zero moving costs, up to RM15,000 (HSBC will absorb stamp duty, legal fees and appraisal for loan documentation).
Scan the QR code to learn more about how you can request HSBC HomeSmart.