How can I safeguard my ability to pay off my home loan?


There are a number of things you can do, including having a financial back up plan, to help protect your ability to pay off your home loan, should anything happen to you.

It’s not unusual that life can be smooth sailing one minute and throw you a curveball the next. Unexpected situations such as changes in health or relationships might be difficult - emotionally, as well as financially.

What you can do today

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 be built overnight, but the good news is putting aside a little money on an ongoing basis could really come in handy down the track.

Check out our six steps on how to set up an emergency fund.

Maintain your insurance

Depending on what life throws at you, having personal insurance may allow you to meet your financial commitments, which could include making your home loan repayments.

After all, at least one in five Australian families will suffer from an insurable event.1

For this reason, checking 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 financial adviser.

If things take a turn for the worse

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.

Lenders may 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 not happy 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 or rent

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 you’re selling your home outright, buying a property that’s cheaper to maintain or seeking a property to rent. So, speak to your lender about how you can go about it and consider seeking financial 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 some of your super in special circumstances, check out the grounds for early release on the Centrelink website.

Being prepared

Life has its ups and downs so it’s best to be prepared. Remember, if you do run into tough times speak to your lender as soon as possible to see what your options are.

Contacting your adviser is also a good idea and if you don’t have one, you can contact us on 131 267 or use our find an adviser tool to locate one in your area.

How much insurance do you need?

There are many factors that come into consideration. Our calculator can help you work out what type and how much cover you may require.

Find out now

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Important information

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This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.