If you’re a soon-to-be parent, now is an ideal time to review your home loan and shop around for a better deal.
As you prepare for parenthood, you need to evaluate your lifestyle and start thinking long term. Now is a good time to assess your home loan to make sure your mortgage is fulfilling your needs, not only for you and your partner but for the little ones to come.
Trading in a high-interest home loan for a lower rate can lead to significant savings in the form of lower repayments and useful features that will better cater to your planned lifestyle. Refinancing is not only an opportunity to reap cost savings, it also offers a way to build equity and take advantage of more flexible terms and features.
Make sure you speak with a trusted mortgage broker and financial planner before making the change.
What you need to consider before refinancing
- Lifestyle change. Before you refinance, decide whether your current property will satisfy your future lifestyle needs. Do you need to renovate and extend the property for an additional bedroom? Or will you need to move into a larger property down the track?
- Budgeting. When you sit down to work out your budget, you’ll need to factor in the additional cost of having kids. Have you considered the cost of childcare and additional living expenses? Will you be able to afford your child’s education? How much time can you afford to take off work? Do you have a contingency buffer for unexpected medical costs? Make sure that you plan and budget according to your future needs. This is particularly important if you decide to take time out of the workforce following the arrival of your baby and your household income decreases as a result.
- Finance options. If you’re thinking of having kids in the near future, you may want to scout for a home loan with lower rates or fees or a mortgage that allows you to access equity. A fixed rate mortgage may also be suitable if you want the certainty and security of knowing what your repayments will be month to month.
How soon-to-be parents can go about refinancing
- Review your needs. As you plan for your parenting years, you need to evaluate your lifestyle and budget and how this will impact your borrowing needs. Do you have enough room in your home to start a family? What degree of risk are you comfortable exercising with your finances? How can you protect your assets to ensure a financially stable future?
- Check finances. Now is the time to speak with a financial planner about how you can build wealth for your family. It’s a good idea to lessen the burden of debt before the arrival of your child as this can give you a headstart. Refinancing can be an effective option for many soon-to-be parents, but you should also review your financial and investment strategies to consider alternative ways to build wealth such as a high-interest savings account, superannuation or property investing.
- Speak up. Speak to your current lender to negotiate a lower rate. With a competitive home loan market, many banks are willing to negotiate a better interest rate in order to retain your business. However, if you find that the features or terms of your existing mortgage no longer fulfill your needs, then it may be time to move on.
- Crunch the numbers. Estimate the cost of refinancing with a new lender. Keep in mind that you’ll need to pay a discharge fee (around $150-$350) to exit your current loan as well as upfront fees such as an application fee with your new lender. Use our switching cost calculator to get an estimate of your total refinancing cost. Remember to consult your accountant or financial planner to help you with the numbers.
- Compare home loans. Speak with a mortgage broker to discuss the type of loan that will best complement your borrowing needs. Maybe you need a home loan with an offset account to help you reduce the amount of interest payable over the life of the loan, or maybe your priority is with a home loan that offers a portability feature if you decide to move to a larger property.
Compare competitive home loans today
Rates last updated December 8th, 2016.
- CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Comparative rate decreases by 0.03%
November 29th, 2016
- UBank UHomeLoan Variable Rate - Standard Variable Rate (Investor with Investor Extra Offer P&I)
Comparative rate decreases by 0.10% | Interest rate decreases by 0.10%
December 2nd, 2016
- UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Comparative rate increases by 0.10% | Interest rate increases by 0.10%
December 2nd, 2016
Planning for parenthood is an exhilarating time, which is why it pays to reconsider your home loan and opt for a more competitive product so you can secure your family’s future.