Your Home Loan was Designed for a Version of You that May No Longer Exist
Your home loan may have stayed much the same. Your life probably has not.
Think back to when your current home loan was arranged.
Where were you working?
What was your household income?
Who was living at home?
What debts did you have?
What were you trying to achieve?
Perhaps you were buying your first home?
You may have been raising young children, building a career or stretching the household budget to secure a property in the right location.
Your loan was established around that moment.
Then life continued.
Income changed
Families grew
Children became adults
Careers moved in new directions
Expenses increased
Properties were renovated
New debts appeared
Financial priorities evolved
Your home loan, however, may still reflect the person you were when the application was completed.
Your loan application is a financial time capsule |
An old home loan application can reveal more than the amount you originally borrowed.
It captures a snapshot of your life at that time:
your income
your employment
your household expenses
your existing debts
the number of people relying on that income
the property you were purchasing
your plans for the years ahead
Open that time capsule today and many of the answers may be different.
That does not automatically mean there is anything wrong with your home loan. It may be operating exactly as expected.
The repayments are being made.
The loan balance is gradually reducing.
Your lender continues to send statements and life carries on.
The more valuable question may be:
Is the loan still supporting the life you are living now?
The quiet arrival of home loan drift |
We call the growing distance between your original loan and your present circumstances home loan drift.
It is not a technical finance term. It is simply a useful way to describe what can happen when life changes and the finance behind it remains largely untouched.
Home loan drift rarely arrives through one dramatic event. It often develops quietly over several years.
You may now earn more than you did when the loan began, however your repayment arrangements may never have been reconsidered.
Your household may have moved from two incomes to one or from one income to two.
The children who once influenced almost every household decision may have left home. Alternatively, adult children may have returned or remained at home longer than expected.
You may now have personal loans, credit cards or other commitments that did not exist when the home loan was established.
Perhaps you are considering a renovation, an investment property, a future move or helping a family member enter the property market.
These are examples for illustrative purposes only.
The loan has not necessarily failed to do its job. The job may have changed.
A functioning loan can still deserve attention |
Homeowners often assume a loan only needs attention when something is wrong.
There may be repayment pressure.
A fixed rate period may be ending.
A major expense may be approaching or another property decision may need to be made.
Waiting for one of these moments can make the conversation feel urgent.
A review before urgency arrives creates space to understand your position without the pressure of an immediate transaction.
It may help you answer practical questions such as:
What is the current balance and remaining loan term?
Do I understand how my repayments are calculated?
What features are included in the loan?
Am I using those features as intended?
Does the repayment arrangement still suit our household cash flow?
How might our existing commitments affect a future property plan?
Are there questions we should consider before our circumstances change again?
These questions do not assume that a different loan is required.
Sometimes the most useful outcome of a review is confirmation that the existing arrangement remains appropriate for your current needs.
That is still valuable.
A review does not automatically mean refinancing |
The words “home loan review” are often interpreted as “change lenders”.
They are not the same thing.
A review is an opportunity to understand before deciding.
It may involve looking at your current loan structure, repayment arrangements, interest rate, features, remaining term and broader financial position.
The outcome could be a change. It could also be a clearer understanding of what you already have and why it remains suitable.
There may be costs, eligibility requirements and longer term consequences attached to changing a loan. A lower advertised rate alone does not tell the whole story.
That is why the conversation should begin with your circumstances and objectives rather than a product. The first question SHOULD NOT be: What loan could I change to? It should be: What has changed in my life and what do I need my finance to support now? |
Compare then with now.
Take a moment to compare the person who originally applied for your loan with the person reading this today.
Then
What was your household income?
How many people relied on that income?
What debts and regular expenses did you have?
How long did you expect to remain in the property?
What did you hope to achieve next?
Now
Has your income or employment changed?
Has your household become larger or smaller?
Have your expenses and financial commitments changed?
Are you planning to renovate, move, invest or downsize?
Are you preparing for retirement or supporting family?
Does your current loan still provide the flexibility you may need?
The purpose of this exercise is not to convince you that something must change.
It is to help you notice how much may already have changed.
Questions to ask yourself |
When was my home loan last reviewed in the context of my life today?
Do I understand the current balance, interest rate and remaining term?
Am I using the features included in my loan?
Have our household income or expenses changed significantly?
Have we accumulated other financial commitments?
Are we planning another property decision in the next few years?
Would an unexpected change to income place pressure on our current arrangements?
Does our home loan still support our present priorities and future plans?
FINANCE MATTERS TAKEAWAY |
Your home loan does not automatically evolve as your life changes. A review can help you understand whether finance established during an earlier chapter still supports where you are today and where you hope to go next. |
A review does not have to result in a new loan or an immediate decision. Sometimes greater clarity is the most valuable result.
If these questions have prompted you to think about how much your life has changed since your home loan began, please feel free to reach out.
We would be happy to help you review your current position and understand the questions worth considering.
If you'd like help with assessing your personal and financial situation, as well as comparing the loans in the market to see if you're truly getting the right deal for you, then call Bob Malpass now on 0431 862 136, email bob@westhomeloans.com.au
