In between work, family and balancing your budget, it can be easy to simply ‘set and forget’ your home loan. While this might be tempting, it’s crucial to make sure your lender and loan are still working for you. Just as you’d visit your doctor for an annual check-up, conducting a home loan ‘health check’ will help you decide if your loan product still meets your needs, financial goals and objectives.
Additionally, your circumstances may have changed since you took out your mortgage – whether that’s a change in employment that affects your earning capacity, a purchase of an asset like a new car, or a necessary change to your budget, such as school or daycare fees. A home loan health check can give you peace of mind that you have the right product, or reveal that it’s time for a switch.
Questions to ask yourself before conducting a home loan check
Unsure if it’s time for a home loan health check? A good place to start is to ask yourself a few questions about your existing loan:
- Am I paying unreasonably high interest rates or fees?
- Is my loan missing some features I need, and am I paying for features I don’t use?
- Could the service offered by my current lender be better?
- Has my financial situation changed since securing the loan?
Even if you haven’t answered yes to the above questions right now, set a reminder to review your loan and loan product annually. You can do this yourself, going direct to your current lender, or with the help of a mortgage broker.
Why work with a mortgage broker?
One advantage of working with a broker is that they can assess your whole financial scenario, and can structure you for the long-term. Brokers will take into account your plans for the future, and use that knowledge to inform their recommendations.
For example, if you’re refinancing in order to purchase an investment property, and plan to do a knockdown rebuild in six months, a broker can guide you to a lender that’s ideally suited to that future goal. By structuring your loan well, even if it means initially paying a higher interest rate, you will see the benefits down the track. While rate rises can be scary in the current market, it’s not as easy as automatically going for the lowest rate – it’s about what you ultimately want to achieve.
Another advantage is that brokers have access to a wide range of options, including banks, non-bank lenders and non-conforming lenders, that might suit your current circumstances, rather than relying on the products offered by a single bank. This gives you a breadth of choice, based on a broker’s qualified assessment of each product’s pros and cons.
Advantages of a home loan health check
1. Save on interest and charges to reduce your loan term
There may be a better lender out there, with a lower interest rate or fees, that aligns with your current circumstances.
You’ll find banks offering anywhere between $2000-$4000 as a refinance rebate with a competitive variable interest rate. However, long-term thinking is key, and a broker can help you decide whether it’s better to forego a cashback offer if another lender has a more competitive rate and lower fees over the life of a loan.
As part of this process, you could also consider additional repayments to reduce your loan term, so you can start planning for your next move.
2. A smarter repayment schedule
A home loan health check presents a great opportunity to adjust how often you make your repayments. You might want to align your repayments to when you’re paid, so it’s easier to track your expenses, or switch from a monthly schedule to fortnightly loan repayments. This helps you pay more principal off your loan, which improves your position overall.
3. Access new home loan features
While interest rates are important to consider, a better rate might not be the main reason to switch lenders.
As part of your home loan health check, you can find out if a new lender offers features you haven’t accessed before, such as a linked offset account and/or redraw facility that can reduce the amount of interest you’re accruing on your mortgage. On the flipside, you don’t want to pay for features you don’t use, so it pays to read the fine print.
4. Consolidate debts and access equity
If you opt for a new lender, a broker can help you consolidate your other debts, such as credit cards or asset loans, which can save on interest charges and streamline your repayments. Depending how long you’ve had your loan and how the property market is moving, you may be able to tap into your home equity to use as collateral for new loans.
For all these reasons and many more, it’s a great time to consider a home loan health check.
You can find other articles on interest rates, property trends and the economic environment here.
Contact mortgage broker in Melbourne
Broker One Finance is a mortgage broker in Melbourne specialising in home loans, investment property loans and refinancing. Contact us today for an assessment call.
