Control your home loan, rather than let it control you
Proactively managing your home loan can help you navigate through a potentially difficult and stressful environment.
With the price of the average home seemingly beyond reach, most would-be home buyers feel like the odds are stacked against them when it comes to purchasing a home.
Buying your first home or investment property is still possible – all it takes is a little time, home loan know-how and the commitment to managing your finances.
So what does this mean for you and your home loan? There are a range of different home loan products now available from numerous lenders, indeed there are a number of differing products often available from a single lender. Switching products to better suit your financial situation, could potentially save thousands of dollars in interest repayments and take years off the life of your loan.
For example, you may want to switch to a lower variable-rate home loan with fewer features, or lock into a fixed-rate home loan where you’ve got certainty in repayments each month. Breaking the terms of your current home loan can be expensive however, so you’ll need to check that you’ll come out ahead when all costs are considered.
Moreover, if you have other debts that are impacting on your ability to meet your home loan commitments, you may even consider consolidating all your debts into one easy monthly repayment.
Consolidating debts, such as credit cards or personal loans, into your home loan can mean paying an overall lower interest rate, and also in turn help improve your cash flow. Please note however that in effect you are spreading short term debt over 20 or 25 years.
And cash flow is an important consideration when it comes to your home loan. While it can be a very effective strategy, refinancing your home loan is not the only option that’s available.
A number of simple tactics can help you against significant changes to your financial situation. These include
- Setting a budget: Work out your expenses, fortnightly or monthly, and factor in your home loan repayments and other commitments. You might need to cut back on spending in places to make sure your home loan is a priority. Keep a diary of your spending and stick to your budget.
- Cutting your debt: Reduce the number of credit cards you have (ideally down to one) and their credit limits, and only use them sparingly. Having a home loan means taking control of your spending.
- Arranging a direct debit: Arrange for your home loan repayments to be direct debited from your pay, so you always make them on time.