Things to consider in an era of rising interest rates for mortgages and student loans
Interest rates for mortgages and student loans are
rising rapidly, aren’t they?
Seeing news like that,
I think many people feel anxious.
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Is a variable interest rate better?
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Is a fixed interest rate better?
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Which one should I choose for peace of mind?
It’s confusing, isn’t it?
But what’s important is
not just searching for
which one is the correct answer.
Can our household continue our lifestyle
even if interest rates rise?
First, it is important to look at that.
When interest rates rise, it affects the borrower
It is a happy thing that
the interest earned on savings increases.
But when we are the ones borrowing,
like with mortgages or student loans, the story changes.
When interest rates rise,
it affects monthly repayments and the total repayment amount.
Mortgages, in particular,
involve a large amount of money in one’s life.
Even a small difference in interest rates
changes the burden over a long period.
Variable interest rate or fixed interest rate, which is better?
Mortgages and student loans
are broadly divided into variable and fixed types.
Variable interest rates tend to have a lower initial rate.
However, there is a possibility that interest rates will rise in the future.
Fixed interest rates make it easier to plan your finances
because the interest rate is set.
On the other hand, the interest rate may be higher than a variable one.
Rather than which is the correct answer,
what matters is which one our household can continue with peace of mind.
Don’t decide based solely on “I can pay it now”
What you want to be careful about is
deciding based on “I can manage with the current repayment amount.”
It is possible that not only housing costs, but also
condominium repair reserve funds, management fees,
utility bills, and food costs will gradually rise as well.
If your current household budget is tight every month,
even a small price increase can easily make things difficult.
That is precisely why you need to
have the flexibility to cope even if prices rise.
This is also an important role of household budget management.
What you should look at in household budget management is “margin”
For example, even if you can pay your monthly repayments now, what will happen when interest rates or fixed costs rise?
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Will it be okay if your monthly expenses increase by 5,000 or 10,000 yen?
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Are you relying too much on your bonus?
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Can you handle sudden expenses?
It is important to look at these things
using your own family’s numbers.
Rather than difficult financial knowledge,
first try checking if there is any margin in your current household budget.
There are three key points to consider in an era of rising interest rates.
🟡 In an era of rising interest rates, the burden on the borrower also changes
🟡 Whether it is variable or fixed, what matters is what your family can sustain
🟡 In household budget management, it is important to have a monthly margin
When you feel anxious, first calm down and look at the numbers.
Once you can see your family’s standards, your way of choosing will gradually change.
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