What if you could save yourself thousands of dollars by deciding to switch?
We know how it is. You’re busy. And the mortgage repayments are automatically deducted from your account, so it’s easy to just keep rolling on, month by month, and not even give them a second thought.
But… Beware! It’s the wise home owner or property investor who takes the time occasionally to review their loan. Because doing so can save money. Potentially thousands of dollars.
Why review your loan?
And this is not just about scanning the market for a lower interest rate, it’s about understanding your loan and the fees and charges and the features within it, and knowing whether or not they’re right for you. And you don’t need to wait for a pivotal moment – a significant change in your circumstances or your finances to prompt a fresh look at your mortgage, reviewing your loan is something you should do regularly. Like going to the Doctor or the Dentist for your personal health, a mortgage check every year is a good habit to get into for your long-term financial health.
Home loan health check
When you conduct a home loan health check-up, ask yourself:
- Is my interest rate comparable to the best in the market?
- Am I paying high fees?
- Am I likely to save money by switching?
- What features does my loan have that I like (and I use)
- Have my financial circumstances changed?
- What are my financial goals?
- What are the refinancing costs?
People refinance for any number of reasons. The most common is because they can find a better interest rate. At other times it might be because they want to unlock some equity and purchase an investment property. Or consolidate all their debt into one loan.
A classic scenario usually involves first home buyers for whom the lending criteria can be quite strict. But after a few years of diligently paying off the mortgage they begin to build up a solid, proven credit history and they then have a wider choice of loans available to them, and it can be quite advantageous to switch.
Understand the costs
But before you switch, you need to understand the exit fees, sometimes called ‘break costs’ associated with your existing loan. Similarly, there will be fees and charges for setting up a new loan. If you are also changing lender, the new lender may require a property valuation too, so factor this in. Once you know what refinancing will actually cost, you’re in a better position to decide whether or not to actually go ahead.
Not all loans are created equal, and they can be complex to understand. An online mortgage calculator will give you a rough idea of the financial impact of a better deal, but it is often best to seek the help of a professional. Mortgage brokers have a really thorough understanding of all the products in the market, across a wide range of lenders. They will be able to ascertain relatively easily (and quickly) whether or not you can get a better deal, and also help you work out whether you’ll be better off in the long run. This can save you time and effort.
And, unless you’re completely frustrated by bad service with your current lender, it is often best to approach them first. They will always do their best to keep a good client, and if they can offer you a better deal on your loan, they will do so, rather than lose your custom to someone else.
Right now, the lending marketing is highly competitive, so it’s well worth asking for what you want. But remember, while interest rates do matter, there is no one-size-fits all home loan and just as important as the rate you pay, is having a loan suitable for your circumstances and needs at this particular time in your life.