When was the last time you checked out if you’re paying too much on your home loan? Research shows only 41% of Australians are confident they know enough about loans to have the one for their situation, but that can mean paying too much each month. So, what do you need to know before you start comparing home loans?
Our circumstances are always changing. We get new jobs, have kids, retire, or become empty nesters.
Regularly reviewing your home loan can put money in your pocket and reduce financial stress.
Understand your current rate
Knowing your current interest rate is the first step to comparing home loans and getting the best deal. You’ll also need to understand what the different rates mean.
A variable home loan interest rate fluctuates as the market changes. That’s great if rates drop but can put pressure on your budget when they go up. An unpredictable mortgage repayment can also be hard to plan for. However, they’re often more flexible, with options to redraw, make extra repayments, or pay out early.
A fixed interest rate is one that locks in current interest rates for a set period, usually 1-5 years. That means no rate increases, so your repayment is always the same, but it also means no rate decreases. After the fixed period ends, you’ll need to either lock in a new fixed rate or revert to a variable rate.
You can also use a combination – a ‘split’ rate – paying a fixed rate on a portion of your loan and a variable rate on the rest.
Many lenders offer sweeteners for new customers, too. An introductory rate might save you heaps for the first couple of years, allowing you to put money away or repay faster while your mortgage is at its highest. Just make sure you know how much you’ll be up for when the honeymoon ends.
Refinancing is easier than you think
Don’t be afraid to refinance for a better offer. Technology has made the shift to a new lender much easier. An LJ Hooker Home Loans lending specialist can deal directly with your current bank to pay out your existing loan and transfer titles and security. You can speed up the process by having your paperwork ready to go, including your current mortgage information, proof of income, and identification.
A lending specialist will also do a comparison for you, so you know how much potential savings are on offer, and that you’re getting a good deal. They will also make sure you get the right home loan features to suit your financial goals.
‘Set and forget’ can cost you money!
Bank interest rates are informed by the Reserve Bank of Australia, which sets the ‘cash’ interest rate and reviews it monthly. When the rate changes, lenders can choose to pass on those increases or decreases to their customers.
Over time, your current rate can become totally out of sync with the RBA’s cash rates. A home loan interest rate that’s been fixed for ten years may mean a bigger mortgage payment for you. And, like any product, home loans are always evolving with new markets, new technology, new features and more. Like many Australians you could be paying a bank loyalty tax that is costing you money (and credibility with the kids).
Now is the best time to shop around
The current home loan market is highly competitive, with offers to suit every kind of borrower. Home loans are more feature-rich than ever, and current interest rates are historically low. If you’ve been thinking about finding a better deal, don’t put it off any longer.
Every day you wait is money you’re paying in interest. There’s never been a better time to start comparing home loans. What will you do with the money you save?
Many Australians are shifting their home loan away from the major banks and lenders to help pay off their home loan sooner – or to put savings back in their pocket.
It can all start with a simple phone, web, or in person chat. Compare your current home loan rate and speak with one of our lending specialists about stress-free refinancing.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.