It’s not unusual that life can be smooth sailing one minute and throw a curveball your way the next.
You might be struck down with an injury or illness, a reduction in income or redundancy, a separation from your partner, or even a death in the family—all of which can be difficult both emotionally and financially.
If you happen to owe money on your home loan, having a financial backup plan, should such a situation arise, could go a long way.
Set up an emergency fund
An emergency fund can give you peace of mind by creating a pool of rainy-day savings that can be used to pay unexpected bills in the event of a financial dilemma.
It also reduces the need to rely on high interest borrowing options, such as credit cards or applying for payday loans, which can often be an expensive form of finance and create unwanted debt.
A decent-sized emergency savings pot won’t build up overnight, but the good news is putting aside a little money on an ongoing basis could really come in handy down the track.
Maintain your insurance
Depending on what life throws at you, having personal insurance may help you to still meet your financial commitments, which could include making your home loan repayments.
After all, at least one in five Australians will be unable to work due to an unexpected accident, injury or illness at some point in their life.
For this reason, checking that you have the right type of cover and enough of it, particularly when your circumstances change, is important.
If you don’t have insurance, now might be a good time to learn about the types of cover available, and whether you take it out through super or via an insurance company, broker or adviser.
Talk to your lender
If you run into tough times and you don’t have an emergency fund, renegotiating your home loan might allow you to reduce your repayments by switching to a different type of home loan or moving to interest-only payments.
You may also be able to seek assistance from your lender by claiming financial hardship.
All lenders must consider reasonable requests to alter the terms of a home loan in instances where someone suffers genuine financial hardship and feels a change would enable them to meet ongoing repayments.
If you’re unhappy with your lender’s response you can also contact the Financial Ombudsman Service or Credit and Investments Ombudsman, both of which are free external dispute resolution schemes.
Sell your home and buy a cheaper property
It may not be ideal, but if you don’t have other options, selling your home might be worth exploring to avoid having your property repossessed and facing what could be an even bigger financial fallout.
It will take time to arrange things, whether selling your home outright or buying a property that’s cheaper to maintain. So, speak to your lender about how you can go about it and consider seeking advice as to whether this is the best path to take before making a decision.
Access your super to make your repayments
In some cases of severe hardship you may be granted early access to your retirement nest egg under strict conditions. However, this should be a last resort.
If you want to know more about how you can access your super in special circumstances check out the early release of superannuation section on the Centrelink website.
Start a conversation with us today about preparing for any of life’s unexpected ups and downs. Remember, if you do run into tough times, we are here for you. It is also a good idea to speak to your lender as soon as possible to see what your options are.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
Shanley Financial Planning Pty Ltd trading as Steve May Financial Services (ABN 19 612 825 180) is a Corporate Authorised Representative of (1265706) of Sensibly Pty Ltd (AFSL 533923)
Nick Shanley, Steve May and Luke Styles are Authorised Representatives of Sensibly Pty Ltd (AFSL 533923)