Life is expensive. The cost of living has skyrocketed while wages seem pretty stagnant, or at least not rising nearly as fast as the cost of living. Did you know that 37% of people in Australia reported that cost of living pressures was the issue having the greatest negative impact on their mental health – more than any other issue. Currently, an estimated 2.44 million Australians suffer from financial stress. Owch. From rising interest rates to your basic everyday groceries… $8 for raspberries – what is this!? However, there’s a few strategies we can implement to manage the rising costs and maintain some financial stability.
Refinancing Your Home Loan
One of the most effective ways to manage rising costs is by reviewing your current mortgage. Interest rates are a significant factor in your monthly repayments, and even a slight reduction can lead to substantial savings over time, potentially save thousands over the life of your loan. If you haven’t reviewed your mortgage in a while, now is an excellent time to do so…
It’s essential to compare various lenders and consider the associated costs, such as exit fees and application charges, to ensure refinancing is a financially sound decision.
To start the refinancing process, begin with a home loan health check. This involves consulting with a broker to assess whether your current loan meets your needs and identifying any missing features. Next, compare home loan products to find the one that best suits your situation.
Types of Home Loans
Understanding the types of home loans available can help you choose the best option for your financial situation. Fixed-rate loans offer stability with consistent payments, making budgeting easier, especially in times of economic uncertainty. Variable-rate loans, on the other hand, can provide flexibility and the potential for lower payments if interest rates drop. Split loans, which combine fixed and variable rates, offer a balance between stability and flexibility, allowing you to tailor your mortgage to your needs. For those who want a balance of stability and flexibility, a split loan might be the ideal choice. This option allows you to fix part of your loan while keeping the rest variable, giving you the best of both worlds. Choosing the right home loan is crucial to managing your finances effectively.
Home loans can also be tailored to specific needs, such as investment properties, construction, or renovations. Investment home loans are designed for those purchasing additional properties, usually with different interest rates compared to standard home loans. Construction loans are specifically for those building a home, providing funds in stages as the construction progresses. Additionally, if you’re planning a renovation or need to cover unexpected expenses, you can access additional funds through redraws on your existing home loan.
Budgeting, and stick to it
The cost of living may very well continue to climb, so we need to find ways to adapt to the new normal. We can do this by setting budgets and sticking to it. Start by categorising your expenses into essentials, like groceries and housing, and non-essentials, such as dining out or entertainment. This will give you a clear picture of where your money is going and where you might be able to cut back. Regularly review your spending by checking your bank statements or using budgeting apps that provide insights and trends. These tools can help you stay on track, identify any unnecessary expenditures, and adjust your budget as your financial situation evolves.
Is It Time for a Home Loan Health Check?
Regularly conducting a ‘home loan health check’ can help you stay on top of your mortgage and ensure it remains aligned with your financial goals. A health check involves reviewing your current interest rate, loan features, and any fees or charges. It’s an opportunity to compare your existing loan with other options in the market and to see if refinancing or adjusting your loan structure could benefit you. With the rising cost of living, ensuring your home loan is optimised for savings is more important than ever.
Staying proactive about your mortgage can make a significant difference in how you manage the rising cost of living. Whether through refinancing, understanding your loan options, or conducting regular health checks, these strategies can help you maintain financial stability and make the most of your home loan.
Need more help? Contact one of our UFinancial team members today and let us help you take the first step towards financial stability.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.
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