This is one of the most common questions that our clients ask us. Our answer is often simple. Circumstances are constantly changing and so should your home loan. If you took your home loan 5 years ago, chances are that your financial capabilities have changed, same case applies to your needs and goals in life. The bottom line is, your home loan should also change to align with your current status.
Apart from this, lenders are getting more competitive when it comes to offering low interest rates, so you must always keep an eye out for a deal that would save you tons of money while shortening the period that your mortgage repayment takes. Refinancing your home loan for a new deal can often yield significant savings.
So when should you review your home loan?
Here is a list of things that should prompt you to take some form of action.
When your circumstances change.
Maybe you got married, or you now have kids, or you got a salary increment. These are all circumstances that would change your ability to maintain the current rate at which you were repaying your home loan. Let’s look at an example of someone whose children are out of school. This means that they can afford to spend a bit more on their mortgage. Shop around and compare your repayment rates with the others that are currently in the market. You might find one that is flexible enough to secure you a lower rate with extra payings so you can clear everything within a shorter period of time.
You might also want to settle for one that has extra features, such as an offset account where you would deposit the extra money that you are saving.
When you finances are stretched over too many debts.
Sometimes you may need to consolidate your debts into your home loan so you can worry about everything as one entity. This is often necessary if you are financially struggling with your credit card, personal loans and the likes. If you get the services of a good mortgage broker they may get you a deal that enables you to fast track your payments for a better interest plan.
When there is a change in interest rates.
The cash rate is constantly changed by the RBA. As a borrower, it is always wise to keep looking for interest rates that are better than the one you are currently being offered. Keep in mind however, that there are a few processes that lenders go through before they can reduce the interest rate so change may take some time to be effective. We are saying this because if you are considering a move to another lender you may need to wait for a few weeks for the RBA advertisement announcing a reduction in rates.
When the ‘interest only’ period is almost over.
Most lenders will not give you an ‘interest only’ term that stretches to the full period of your loan repayment. Those who are in investment property understand how important this period is, so if your lender will not extend it, the wise decision would be to move to another lender. As your expiry date approaches, use the time to review your home loan so you can find one that saves you money while increasing your ROI (return on investment)
When the fixed period is coming to an end.
The common thing that happens when the fixed period ends is that the interest rate that was once competitive changes to a standard variable rate, which consequently changes your payment rates. You will not find fixed rates that are as good as the ones given when securing your loan, but variable rates differ with each lender. Take time to review what each one offers, compare these variable rates with the one your lender is shifting to and settle for the one you are most comfortable with.
When you haven’t reviewed your loan in years.
This is mostly the case with those who sit back and become comfortable as loan repayments are regularly subtracted from their pay check. As a result, you constantly miss out on deals that lenders offer to home loan borrowers in an attempt to win them over. By staying in the know, you will be informed on how competitive your current home loan is and you may even land yourself a pocket friendlier deal. One of the best ways to do this is to sign yourself up on a few lenders mailing lists. This way, you can stay in the know despite your otherwise busy schedule.
Your home loan should be reviewed at least once every two years. As a matter of fact, any financial commitments that you have made should be regularly reviewed so that you can secure a healthy financial future.
Do you think it’s about time you reviewed your home loan? Get in touch with us. At Mortgage Hero we have a team of experienced mortgage brokers who will review your current home loan and thoroughly filter through others to see whether they can earn you a better deal.
Remember, home loans are not a glove that fits all. You need a partner who will listen to your needs, analyze your financial capabilities, and eventually structure a mortgage plan that best suits you. With our team of friendly professionals, you will never have to worry about your mortgage decisions again.