For most people the mortgage is the biggest financial commitment we will have.
With your current income you may be comfortably making the repayments on your home loan every month, but what would happen if you were made redundant or illness prevented you from working for a time or indefinitely.
It’s an important question every homeowner should think about. There are steps you can take to make sure you’re prepared should you find yourself in a financially difficult position.
Protect your biggest asset
Most of us take care to insure our cars, buildings and contents. Your income and the ability to earn is likely to be your biggest asset, so make it a priority to protect it. Mortgage Protection Insurance is a form of personal insurance that offers cover for illness, and involuntary unemployment events. This is a general type of insurance, you might also consider speaking with our financial adviser to review cover specific to your needs and policies already in place.
Build up emergency savings
You sacrificed and saved to purchase your first home, right? With a bit of focus and discipline you can do it again. Set a savings goal to set aside a designated amount of money that can be tapped into for an emergency. An offset account or redraw is the perfect facility to park this money. A general rule of thumb is to have at least three to eight months of living expenses saved. Even if you don’t have those features in your home loan you can deposit funds in a high interest bearing account
Don’t over extend yourself
There is a reason your mortgage broker will help you work out your borrowing capacity and limit on price range of a house. You will be paying off this mortgage for some time and you need to be able to afford the repayments week to week, month to month, year to year. If you already have a mortgage and feel that your repayments are too high, you may wish to consider refinancing and switching to a lender with a sharper interest rate as this will lower your repayments. Your mortgage broker can help you review you loan look at cost to change lenders and help you work out if moving is right for your situation.
Taking adequate steps to protect yourself and your mortgage is vital. If you do experience any event that affects your to make repayments (employment or health issues) it is important to keep communication lines open with your lender. Speak to your mortgage broker who can renegotiate the terms of your mortgage with your lender and work out a solution to assist you while you look for another job. Some lenders will offer financial hardship assistance to provide temporary relief for anyone struggling with their mortgage repayments.
You might also be interested in:
- Home loan repayments calculator
- Remaining balance calculator
- Compare interest rates calculator
- What is refinancing
- Can refinancing your home loan save you money