Checking up on your home loan rate is not something that’s usually at the forefront of our minds. When you take out a property loan, it is easy to simply set up the repayments and then carry on with life as normal.But even after you’ve financed your property, you can still shop around for a better deal. You aren’t confined to that one single option for the duration of the loan. In fact, it’s in your best interests to review your home loan at least every 12 months.
By taking the time to review your home loan rate regularly you might be able to:
- Reduce repayments and save thousands of dollars
- Reduce the term of the loan
- Avoid paying excessive loan and account fees
- Find a loan with more flexible features
Let’s look at these 4 reasons to check your home loan rate.
1. Reduce Repayments and Save Thousands
If you’ve had your home loan for several years it’s likely the rate you’re paying now is different to the current interest rate. And right now, Australia’s interest rates are low!
It might be a great time for you to look at what you’re paying and consider whether you are getting the lowest rate for your loan.
Once upon a time most banks adjusted their interest rates in line with the RBA’s change in ‘official’ interest rates. Those days are long gone yet many of us believe that when we read that the RBA has not changed rates (which they haven’t done since July 2016) then home loan rates haven’t changed either…WRONG!
There are now so many more factors influencing all banks at an individual bank level that the diversity in interest rate offerings is currently as wide as it’s ever been.
Consider if you can negotiate a better deal with your current financial institution. This could save you money on fees for refinancing, especially if your bank comes to the table with a great offer.
By examining your current interest rate compared to current offers on the market you might be able to save thousands over the term of your loan by refinancing to an alternative loan product.
Ask your finance broker to help you compare the loans currently on the market.
2. Reduce the Loan Term
If you’re able to refinance to a lower interest rate not only will your minimum repayments decrease, you might even be able to reduce the effective term of your loan by optionally maintaining repayments at your current levels.
If your current financial situation is a bit tighter than in previous years, a reduced minimum repayment can do wonders to ease the pressure on your wallet. Knowing you have those extra dollars back in your account each week can really improve your cash flow.
And if you’re not feeling the pinch, you could use the additional funds to put towards other investments.
Alternatively, if you reduce your interest rate and continue with your previous repayments, you stand to take months if not years off the term of your loan by just paying that extra amount each time.
3. Reduce Fees
Compare your current home loan fees to the new products on offer right now. What are banks offering to new clients? Some of the current offers designed to engage new customers might be superior to your older home loan product.
Discuss with your broker the breakdown of the fees associated with new products out there, and compare it to what you’re paying now. Consider if it’s costing you more to stay where you are.
It might be possible to not only bring down your interest rate, but also save on reduced loan fees.
4. Other Features
What other features does your home loan offer? Is there a better deal out there for you?
Consider your priorities in negotiating the best deal – what are you looking for in a home loan? For example:
- Does the product offer an offset account? By keeping your funds in an offset account, you stand to save a lot. You’ll only be charged interest on the current loan principal minus the balance of your offset account. The more you take advantage of an offset account, the more you’ll save.
- What about a redraw facility? It’s great to be able to make extra repayments, but you might need to redraw that money someday. Perhaps put it into another investment property? Meanwhile, it’s sitting against your current mortgage saving you money, working for you until you need it.
These are just a couple of the features a loan product might offer you in addition to a lower interest rate. Your finance broker will be able to find a product that has the features you need.
Many people go years without giving their home loan rate much consideration. But, if you make reviewing your mortgage a conscious habit, you’ll be able to take advantage of any current rate reductions and other value for money home loan products.
Ask your finance broker to conduct an annual home loan review for you.