When you’re planning for a baby (or already have a little one on the way), it’s very easy to become overwhelmed with “all the things” you suddenly need to do and/or buy.
What type of pram should you get?
What about a cot?
Should you buy a capsule or adaptable car seat? Which one will fit into your car? Actually, do you need a new car entirely*?!
And so the list goes on…
We always find it interesting that the most important thing to investigate never appears on any ‘preparing for baby’ to-do list.
But, it can have a significant impact on how much paternity leave you can afford to take and your standard of living during that time.
Yep. You guessed it … it’s your home loan.
Reviewing your home loan may not be as exciting as shopping for teeny-tiny baby clothes and you’re unlikely to find influencers posting about it on Instagram. But we cannot stress enough how important it is to review your finances before your new family member arrives.
If you’re anticipating a reduction in household income (whether temporary or permanent), every extra bit of cash you can keep in your own pocket helps. It’s critical you don’t pay more interest on your home loan than you need to and if you haven’t reviewed your home loans for a while, it’s likely you’re doing exactly that. Voluntarily.
If you’re anticipating a reduction in your household income, here are some things you can do to make it lessen any financial pressure.
Review your home loan
2016 Census data shows us that Canberrans spend more than one fifth of their annual household income on mortgage repayments. So before you cut out your daily coffee and start taking vegemite sandwiches for lunch every day, let’s take a closer look at your biggest monthly expense – your home loan.
If you’ve been with your existing lender for a while, it’s likely your lender is offering new-to-lender clients special rate discounts they’re not extending to you. Have us review your loans and we can potentially secure better rates on your existing loans. Alternatively, we might even discover there are more suitable – and cheaper – home loan options available to you.
Reduce your debt
If you’re only paying the minimum monthly amount on your credit card, start paying off the balance to reduce avoidable interest costs. You might also want to investigate whether this debt could be consolidated into your home loan, or a 0% credit card (which you then need to pay off in full within the specified time). Keep in mind though, if you consolidate personal debt into your home loan, you need to continue to make the same repayments you were making when the debt was separate – otherwise you end up paying more interest over the long term.
Determine a budget
First work out how much you need each month to cover your bills, mortgage and other living expenses. Then, work out how much income your household will receive via salary, paternity leave income and/or other benefits.
Creating a budget will help to determine how much of a cash buffer you need, or how long you can manage with a reduced household income.
Put money aside now
Once your personal debt is under control, start putting money aside to build up your cash reserves. You may need to cut back on non-essential items to do this. Having a buffer can help with those unexpected expenses that pop up (like the time the car decides to break down on your first family trip to the coast).
But baby is already here, is it too late?
Whilst the best time to review your home loans is when you’re planning to add to your family, if you’re already enjoying those sleepless nights, there are still lots of ways we can help to reduce your monthly home loan expenses.
Since each lender treats maternity leave income differently (some will accept it, others won’t and some will only accept it when specific conditions are met), it’s important you know which lenders to approach.
Alternatively, just talk to us. We know the ins and outs of maternity leave policies across many different lenders and we’ll do all the comparisons, analysis, home loan paperwork and chasing-up for you.
Otherwise, you will spend your days traipsing from one bank to another, trying to work out which lender can provide the option that is right for you and your family. Which is exactly what you don’t want to be doing with a newborn in tow.
*If you are planning to upgrade your car, we might be able to help! Find out more here.
