Review your home loan regularly. What suited you when you first set up your loan might not suit you now. Consider lifestyle changes, rate updates and more.
Consider what options you have. You might be able to pay off your loan sooner and with less interest. For example, extra repayments, offset accounts and redraw facilities.
Keep on top of other debts. Whether credit card debts, or something else, get help from your financial adviser or mortgage broker to manage and reduce them when you can.
Always look ahead. Whether saving, setting goals or exploring potential investments, make sure to budget and plan ahead; your future self will thank you.
Anytime is a good time to review your finances and build healthy habits. When it comes to managing a home loan, regardless of the time of year or stage of life, refreshing your financial knowledge and researching your options can help you stay organised, keep on top of your loan, and potentially pay it off faster or with less interest.
Below are some helpful habits to consider. Remember, everyone’s situation is unique, so not all may be suitable for you. Be sure to chat with your broker or financial adviser before making any decisions or changes.
1. Review your home loan regularly
Why review your home loan regularly? Because your needs and circumstances change over time, such as income shifts, financial priorities, or major life events like starting a family. And of course, interest rates change too. Another lender might offer features and pricing better suited to your updated situation.
How to do it:
Start by jogging your memory on the terms of your current loan, then do your research. Take a look at available rates, deals, and home loan features; compare rates with each other and with your current loan.
Negotiate your interest rate with your current lender. Share your findings with them and see if they can make adjustments. Often, lenders would rather adjust your rate than lose you as a client.
If your lender doesn’t offer a better rate, speak with a broker or financial adviser to explore your options further. They can support you by negotiating on your behalf, or help you find a more suitable lender.
With the help of your broker or financial adviser, consider refinancing. If they suggest it’s the right option for you, the next step is for your broker to submit an application to your chosen lender. The application is then reviewed, and if approved, your new settlement is arranged.
2. Make extra repayments when and if you can
Extra repayments are additional payments you make on top of your regular mortgage repayments. They help you pay down your loan faster by adding extra cash when and if you can.
How to do it:
When and if you have extra cash – such as a bonus or tax refund – and it’s financially sensible for you to use it, consider applying it to your loan as an extra repayment.
Use an extra repayments calculator to see how it could support you on your home loan journey. It could mean paying less interest over the life of your loan and reaching your mortgage-free goal sooner.
Before making any decisions or starting extra repayments, speak with your financial adviser to ensure it’s appropriate for you. For example, you might have other debts that make more sense to pay off first.
If your financial adviser gives you the green light, you can make your extra repayments. There are a few ways to pay: in person at your lender’s branch, over the phone, or via internet banking.
3. Consider using an offset account (and make use of it)
Offsets are bank accounts connected to your loan you can deposit and save money in; your balance is usually subtracted from your loan for interest calculation, depending on product features. E.g. Depending on the type of offset account, if you have a $500K loan and you put $50K in your offset account, you’ll only be charged interest on $450K.
How to do it:
Check with your lender if they offer an offset account feature and if it's applicable to your specific loan and situation. Also make sure to ask if there are any fees associated with it.
Next, chat with a broker and/or financial adviser to explore whether an offset account could be suitable and beneficial for you.
If your broker or financial adviser advises that an offset account is suitable for you, you can then set one up. Depending on your lender and bank, this might involve opening a transaction account with your lender and linking it through your online banking app.
Start using it as part of your everyday banking. Keep an eye on any fees so you’re getting value from it.
4. Consider opening a redraw facility
What’s a redraw facility? It’s a feature that lets you make extra repayments to save interest over the life of your loan, while still giving you the flexibility to access those extra funds later if you need cash for unexpected costs (such as a loss of income or another sudden expense).
How to do it:
Start by having a chat with your lender to see if they offer a redraw facility and if it's applicable to your specific home loan and situation. Make sure to ask about any associated fees – setup, ongoing, and redraw fees.
Then, get in touch with your broker or financial adviser to check if a redraw facility is the right move for you. They’ll help you assess whether you can afford extra repayments and if this feature is suitable.
If your broker or financial adviser says you’re good to go with a redraw facility, the next step is to set it up. Each lender will have different processes or policies, but it might involve completing an application form online and activating it through your home loan account.
Make extra repayments when and if you can (speak with your financial adviser for advice on when and how much to pay). Then, if you need it, redraw.
5. Review your insurance coverage
Just as it’s important to regularly review your home loan, it’s also important to review your insurance. From home and contents to landlord insurance (if you own an investment property), make sure you’re on the right policy, with the right provider, and properly covered. No insurance yet? Set it up sooner rather than later to help protect you from unexpected expenses.
How to do it:
Jog your memory on your current policies (if you have any). Review how much you’re paying and check what’s covered. Speak with your provider if you need to.
Review your needs and compare them to your current cover. For example, have you bought more expensive belongings since setting it up? You may need to increase your cover.
Do your research and compare options. There might be another provider, or even a different policy with your current provider, that’s more suitable. Check coverage limits, exclusions, excesses and prices.
Double-check with your financial adviser. If they agree it’s the right move to switch policies or providers, lock it in. Make sure your new cover is active before cancelling the old one so you’re not left unprotected.
6. Manage and reduce other debts
Something very important to keep on top of, and get help from your financial adviser with, is managing and reducing other debts. You might have credit card debt or something else. Getting on top of this as early as you can could help save on interest and fees later on.
How to do it:
Start by listing all your debts, including credit cards, personal loans, car loans, or others you know about.
Next, talk with your financial adviser. They can help you review your debts, including balances and key terms like interest rates, fees, and repayment schedules. This will give you a clearer picture of your overall debt situation.
Next, discuss your options with your adviser. They might suggest prioritising paying off one debt over another (for example, the one with the higher interest) or recommend solutions like debt consolidation, which combines multiple debts into a single loan.
Once you’ve agreed on a plan with your adviser, start following it to get on top of your debts and work towards becoming debt-free sooner. A mortgage broker can help you explore consolidation options through suitable home loan products, depending on your situation.
7. Explore future property or investment goals
Consider your long-term financial goals, such as buying an investment property or other ways to generate passive income alongside your salary. This can help build wealth over time and support your overall financial plan.
How to do it:
Start by researching what you might like to invest in, whether a house, apartment, shares or other options.
Next, talk to your financial adviser about your goals and ideas. They will help you understand what you can realistically afford, including any equity in existing properties or other assets you might be able to put towards a deposit.
Review your research and goals again, keeping an open mind and staying flexible. For example, consider properties in different locations that might be more affordable (if you’re looking to invest in property). Be thorough; look at rental trends, vacancy rates and other key factors.
Share your updated goals with your adviser. If they agree, begin your investment journey. You may have the cash to buy now or you can start saving towards it.
Bonus habit: Build a financial buffer for peace of mind
A helpful option to stay financially organised is to put aside savings where you can. Work with your financial adviser to create a budget that suits you and save consistently to build a financial buffer. A buffer can provide peace of mind if rates change or unexpected costs come up, especially if you’re on a variable or split loan, or be useful in an emergency. You might even choose to put it towards future investment goals; just double-check with your adviser before dipping into it.
Build healthy habits today, tomorrow and into the future
Healthy financial habits are important for everyone. Building, refreshing and maintaining the right habits for you, with the guidance of a broker or financial adviser, over time helps you prepare for the expected and unexpected.