The word recession and economy have become incredibly popular in the last few months.
We are seeing a crisis that seems to be affecting all of us and the possibility of a recession has turned into a reality, but we have yet to see how much this recession is going to be affecting other aspects of our economy. Home loans are probably the biggest concern for many, and it makes sense that people want to protect their investment. With that said, here are some relevant and very useful moves that you can implement in order to help recession-proof your home loan.
Maximise emergency funds
There has never been a more crucial time for everyone to make an extra effort to save as much money as possible. Having six months’ worth of your salary in your emergency fund is a can be a great milestone and acts as your first line of defence when the chips are down.
Times are very unpredictable right now and we all need to make sure that a portion of our monthly earnings is going into our savings fund where possible.
This is probably the most essential tip that we can give to anyone right now. It’s a universal strategy that works for everyone regardless of their professional and their financial status.
Mortgage redraw and offset
As you may have seen in the news, certain lenders are now taking the additional repayments you’ve made out of redraw so they’re no longer accessible. These banks and lenders are inside their rights to do so but if you have that money set aside for emergencies it might be worth looking at an offset account.
An offset account sits beside your home loan and any money in the account offsets the interest on your loan. This is essential how redraw facility works but the difference is, bank and lenders don’t have access to remove money from the offset account.
Life insurance review
Be warned that insurances polices such as Income Protection do not cover you in case you lose your job or your business goes under.
Reviewing your current life insurance cover, insurance needs and premium costs to ensure they’re right for your individual needs. COVID-19 has shed new light on the need to be adequately covered but it’s also prudent to ensure you’re not over insured as the premium costs could be used towards building your emergency funds.
These are times of uncertainty and we don’t know what could happen tomorrow in terms of our financial stability. The most important thing that we can all do is to ensure that we are covering all aspects of our finances to withstand this crisis with optimal results.
Keep in mind that factors such as the COVID-19 pandemic are temporary, but the rippling effect of a bad financial situation could be felt for years to come. That’s why, in times like these, it’s crucial you pay extra attention to your financial situation and avoid any unpleasant surprises without being prepared.
If you’d like to look at recession proofing your financial position, please feel free to contact us to see how we can help.
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General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.