With the current travel restrictions in place making international travel unlikely to return in the near term, it is no wonder many Australians have reconsidered how they would like to spend time with their family, their lifestyle and entertainment choices/options.
As a result, we have seen Australians flocking to explore their own backyard and creating a spike in domestic tourism1. Travel to regional and outback areas of Australia is now on the radar of many travellers. As a result, they are purchasing four-wheel drives for exploring and caravans, camping trailers and motor homes for extended regional travel.
If they’re not exploring they are enjoying their local area with family and friends on motor bikes, speed boats and jet skis.
For those who are not traveling, they are spoiling themselves and using the opportunity to upgrade their car, potentially a sports car or convertible, that they would have previously considered a luxury. In fact there has been a 68% increase in new car sales since May last year2.
Does this sound appealing?
Are you considering the purchase of a lifestyle item?
While you may not necessarily have the savings to purchase these items, there are a few different funding options available so that you can enjoy more time with your family. While most immediately think of a car or personal loan to fund these items, it might also be worth considering utilising your home equity to fund these purchases. However you need to carefully consider the pros and cons of utilising an extension of your home loan to fund these lifestyle items.
The most notable advantage of using a home loan extension to fund the purchase of your lifestyle item is that the interest rate available is usually lower than other forms of credit. This is due to your home being the security for the loan (rather than the lifestyle item) and provides greater certainty to the lender in the event you are unable to repay the loan. However, you need to be careful that you do not end up paying more over the term of the loan. While you may be paying a lower interest rate, you could in fact end up paying more interest if you were to repay the loan over a longer period. Many car and personal loans are taken out over 2 to 5 year terms which could be a significantly shorter period if your home loan has a remaining term of 10 or more years.
This can however be avoided if you allocate the loan funds to purchase your lifestyle item into a split
loan that you repay over a shorter time.
However, everyone’s financial circumstances are different and it’s important to understand your
objectives and the nature of your intended purchase to determine the optimal/most suitable financial
solution for yourself. It’s best to contact us, your finance specialist, so we can better assist you in your
decision making.
