What not to do when repaying your FIFO home loan

As a FIFO worker in South Australia, your income pattern is unique. While you might earn substantial wages during your on-site rotations, managing home loan repayments requires careful planning to match your fly-in, fly-out schedule. Understanding what not to do when it comes to repayment strategies can save you thousands of dollars and help you pay off your home faster.

Don't ignore the power of extra repayments

One of the biggest mistakes FIFO workers make is not taking advantage of their higher earning periods. When you're on-site earning good money, resist the temptation to spend everything during your time off. Instead, consider making additional repayments on your home loan during these peak earning periods.

For example, if you have a variable home loan with a current interest rate of 6.5% and a loan amount of $400,000, making an extra $500 per month in repayments could save you over $80,000 in interest and reduce your loan term by approximately 7 years.

Many home loans for South Australia FIFO workers come with the flexibility to make additional repayments without penalties, so check your loan features before applying for a home loan.

Don't overlook offset account benefits

An offset account can be particularly valuable for FIFO workers who experience irregular income patterns. This account works by offsetting the balance against your loan amount, reducing the interest you pay.

Here's how it works for your financial situation:

• Your home loan balance: $350,000
• Your offset account balance: $50,000
• Interest is only charged on: $300,000

During your rostered time off, you can access funds in your offset account for living expenses, while still reducing your overall interest payments. This strategy is particularly effective when combined with disciplined saving during your work rotations.

Don't stick with the wrong interest rate type

Choosing between a fixed interest rate home loan and variable home loan rates depends on your risk tolerance and market conditions. However, many FIFO workers make the mistake of not reviewing their choice regularly.

Fixed interest rate benefits:

• Predictable repayments for budgeting
• Protection from interest rate increases
• Suitable for workers who prefer certainty

Variable interest rate advantages:

• Potential to benefit from rate decreases
• Usually offer more features like offset accounts
• Often provide interest rate discounts

Some lenders offer split loans, allowing you to have both fixed and variable portions. This can provide a balance between security and flexibility when calculating home loan repayments.

Don't ignore your loan to value ratio (LVR)

Your LVR affects whether you'll need to pay lenders mortgage insurance (LMI), which can add thousands to your borrowing costs. As a FIFO worker, you have several options to avoid or reduce LMI:

1. Professional packages: Some lenders offer LMI waivers for FIFO workers up to 90% LVR
2. Larger deposits: Saving for a 20% deposit eliminates LMI entirely
3. Government schemes: First home buyers might access schemes that reduce LVR requirements
4. Family assistance: Guarantor loans for FIFO workers can help reduce your effective LVR

Remember to factor in additional costs like stamp duty when buying a home, as these affect your overall financial commitment.

Don't neglect regular loan reviews

The property market and lending landscape change constantly. What was a suitable home loan when you first applied might not be optimal now. Regular reviews can help you:

• Access better home loan interest rates
• Take advantage of new loan features
• Adjust repayment strategies based on income changes
• Consider home loan refinancing for FIFO workers options

Many lenders offer loyalty discounts or rate matching, but you need to ask for them. Don't assume your current lender is automatically providing you with their most competitive offering.

Don't rush the application process

While it's tempting to want a streamlined application process, rushing through your home loan application can cost you. Take time to:

• Gather complete bank statements and employment documentation
• Research all available home loan options from banks and lenders across Australia
• Get pre-approved before house hunting to understand your borrowing capacity
• Compare features, not just interest rates
• Consider professional advice about your specific circumstances as a FIFO worker

Getting loan pre-approval gives you confidence when making offers and demonstrates to sellers that you're a serious buyer.

Don't underestimate the value of home equity

As you pay down your loan and your property potentially increases in value, you build home equity. This equity can be used for:

• Expanding your property portfolio
• Home renovations to increase property value
• Debt consolidation loans for FIFO workers to reduce other higher-interest debts
• Emergency funding during work disruptions

However, don't treat your home like an ATM. Using equity should be part of a broader financial strategy, not a way to fund lifestyle expenses.

As a FIFO worker in South Australia, your unique employment situation requires tailored repayment strategies. By avoiding these common mistakes and implementing smart repayment approaches, you can save money and build wealth more effectively. Remember, what works for traditional employees might not suit your situation, so seek advice from specialists who understand the FIFO industry.

Call one of our team or book an appointment at a time that works for you to discuss repayment strategies that align with your FIFO lifestyle and financial goals.