Archive for March, 2010

What will you do if interest rates rise?

Some economists have suggested interest rates may increase another one or two percent over the next 12 months. Whilst 2% might not sound like a lot, it translates to an extra $199 in monthly repayments on $150,000 home loans. For a $250,000 loan, this would be an extra $332 you would have to pay.

Planning ahead is the key
Have you considered what you will do if rates increased? There are a number of calculators online that will allow you to run simulations on your budget. If you know in advance what areas of your budget have the most flexibility it will give you a good grasp on exactly how interest rates will affect your lifestyle. If you are considering a new mortgage, ask your broker to give you an estimate of the payment schedule if rates were to rise by 3%. If you think 3% extra is an impossible demand then you are probably punching above your weight. Proceed with great caution.

Reevaluate and consider your plan regularly
Mortgages, like houses, come with many options. And like housing, needs change throughout our life. Make sure you understand which features your mortgage has, which you need and which you are paying extra for. Do you really need a line of credit? An offset account? If your needs have changed, the right home loan for you has likely also changed.

Make a contingency plan and consider the worst case scenario
If your mortgage is for an investment property, what is your plan if interest rates rise? Will you elect to raise the rent or cut your budget in other ways? At what level of repayments would you need to put the property on the market. Having these plans in writing will help you make a rational decision if you are under a lot of mortgage stress in the future.

Cost to move lenders
Some things in life are forever. Mortgages are not one of them. Read the terms and conditions and know in advance how much you will be out of pocket to take your business elsewhere. Even if you remain a loyal customer to one bank, this information will give you bargaining power if you need to renegotiate.

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Diet, diet, weight loss surgery

Overweight?  Obese?  Tried dieting and exercise with no good result?  One of the more radical options to discuss with your local doctor is weight loss surgery. Sound invasive?  Yes and no.
 
The first surgical procedure for weight loss was performed by a surgeon named A Kremen in 1954.  Called an “intestinal bypass”, this rather crude procedure linked the upper and lower segments of small bowel.  The effect was to bypass the section of gut where most food absorption takes place.  Although this was effective, serious complications including dehydration, diarrhea, and salt imbalance were not uncommon.

Surgical procedures for weight loss, like bariatric surgery, have come a long way since then.  Minimally invasive surgery is now an option for some people.  A popular option is gastric banding using new adjustable bands.  Gastric bands simply reduce the functional size of the stomach – sometimes by as much as 90%.  A typical stomach size after gastric banding is approximately 3-4 tablespoons in size.  This reduces the quantity of food which can be consumed in a single sitting, and speeds up satiety.  Gastric bands do alter food absorption.  One advantage of gastric banding is that unlike Dr Kremen’s techniques of the 1950’s, there is no need to cut, staple, or reconnect bowel or stomach tissue.  Recovery time is significantly shorter, and complications are far less likely.  Patients tend to notice the greatest change in their weight in the first 12 - 18 months after gastric banding surgery.  After this weight is more likely to plateau - in my view, this should not be considered to be a major problem.  A good clinic will ensure you are referred off for lifestyle therapy to help you learn new healthier eating habits and behaviors.  These techniques can be used for life.

Whilst I wouldn’t be rushing off to my nearest surgeon because I’ve gained a few extra pounds from Christmas festivities, obese people who have made a genuine effort with less invasive treatment should investigate their options.

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