Your home loan has already played a big part in your life: it helped you buy your home. Yet life has a habit of giving you surprises, and you’ll want your home loan to be adaptable if it is going to meet your needs during times of change.
By taking a little time to get to know your home loan, you may find that it has the flexibility to cope with whatever lies ahead.
If you and your partner have two incomes and no kids, this may be a good time to get ahead on your home loan.
You may be able to make additional repayments, or change your repayment amount so that you’re making larger repayments. This can make a big difference when it comes to paying off your home loan sooner.
Variable rate loans tend to offer the most flexibility when it comes to repayments, but you might also be able to make additional repayments on a fixed rate loan. Talk to your lender to find out more.
Another way that you might be able to get ahead on your loan is by opening an offset account. This works just like a transaction account except that every dollar in it (up to your loan balance) is offset against your mortgage balance, reducing the amount of interest you have to pay.
The arrival of a new baby may mean your family has to live on a reduced income for a while. If so, you may want to consider changing from a variable rate to a fixed rate loan.
With a fixed rate loan, which locks in an interest rate for an agreed period of time, you do lose some flexibility, but you gain certainty about what your repayments will be in the future, no matter what happens to interest rates.
You also may be able to split your loan, so part is fixed and part variable, giving you a combination of security and flexibility.
When the children start to outnumber the parents you may need money for an extra bedroom or bathroom. There are a number of options when it comes to financing your renovation.
These include Top Ups, which increase your loan without you having to go through the process of applying for a new loan, and redraw, which enables you to access any additional repayments you have made.
Older and wiser
As you and your home loan mature, it may be time to look at your equity and work out what options it gives you.
Your equity is the value of your home minus the balance of your home loan. It rises as your home gains in value and as you pay off your loan. Equity might allow you to renovate your home or buy an investment property.
If the children have left home and you’re moving to somewhere smaller, this may be the time to change your loan type.
Don’t forget to use our tools and calculators when you’re working out your finances and looking for a new home.
Speak to one of our Home Lending Specialists for a free, 15-minute home loan health check.