Future proofing your home loan
One thing for certain is that change is inevitable.
Getting older, moving jobs, having children, retiring, or suddenly becoming ill are some life changes that can put pressure on finances. But what can be done to future-proof a home loan?
Credit Union SA CEO, Grant Strawbridge, shares his top tips:
Examine the options
Become familiar with the various mortgage options on offer from your and other lenders. Some online research is an easy way to improve your knowledge and can put you on the front-foot if there’s a sudden change to your financial circumstances.
Split the difference
Because low interest rates won’t last forever, anyone with a mortgage should make sure they aren’t facing a shock when a rise eventually comes. You may want to consider a split home loan, with a portion that is fixed and the remainder as a variable mortgage option. This is a great way to safeguard against potential future interest rate increases, and means you still reap some of the benefit if rates happen to go down.
Build a buffer
If you make more than the minimum mortgage repayment, you are already building a security buffer. This is a great way to pay a loan off quickly, save some serious interest over the life of a loan, and build extra equity in your home. Weekly or fortnightly payments are another way to drive down a mortgage without too much hip-pocket pain, and any extra money you pay on top of your regular repayments can usually be redrawn if needed.
An unexpected windfall is the perfect opportunity to pay extra into the mortgage, and is a great way to future-proof a home loan. Whether it is a work bonus, sudden inheritance, or annual tax return, think about putting all or part of it into your mortgage rather than going on a spending spree.
Do a stress test
When it comes to your mortgage, spend time crunching the numbers to see if your finances could absorb a rate rise. If you’ve taken out your first home loan in recent years, chances are that you’re yet to experience an interest rate rise. Plan ahead and understand the short-term impact of a variable rate increase, and decide if you can absorb the extra cost.
Read more handy information about how to keep on top of your finances.
This is general advice only and doesn’t take into account your objectives, financial situation or needs. Conditions, fees and lending criteria apply and are available on request.