How long ago did you take out your home loan? Since then, how often have you talked to your lender or broker? If you haven’t kept in touch, you are not alone. Many Australians take a set-and-forget approach to their home loans without realising it can be a costly mistake.
The reality is that, from your interest rate to the features on offer, the loan that suits you will change over time, and, if you’ve got the wrong one, it could be costing you thousands. With COVID-19 impacting cashflow and broader goals for many of us, if you haven’t been taking an active role in managing your mortgage, now is a good time to start exploring your options.
Here are my top tips to make sure your mortgage works for you.
#1 Check in with your lender or broker annually
Just like your dental check-up, a mortgage check-up should be scheduled annually. Your dentist probably doesn’t find something wrong every time, but you still go (or at least know you should!) and it’s the same with your mortgage.
This check-in will help ensure you are not only receiving competitive rates, but also have access to the features that will best support your life goals over the next 12 months.
It’s not likely you would consider changing your mortgage annually, the fees would almost certainly outweigh the benefits, but when there is a disconnect between what you have and what you need, you can identify it early and make sure you have the right features before it becomes a problem.
It also helps you maintain a relationship with your lender or broker, which can be helpful when navigating your options. Keeping an ongoing relationship with your broker will mean they can retain a deep understanding of your needs, putting an expert in your corner who can actively look out for products that may suit you better.
#2 Review your mortgage whenever your lifestyle changes
The right mortgage should help you with the features that will support your lifestyle, particularly when there is a significant life event or a change in your circumstances. For example, if you were a couple with no kids when you took out your mortgage, but now you are ready to start a family – it’s important to think about your mortgage in your planning. You may not have even considered what would happen when one party has time off work for parental leave because it wasn’t on your radar. Now, it’s important to have a loan that supports you with the temporary transition to single or reduced income.
Whether it’s starting a family, the kids growing up and moving out, a change in income or cashflow, or a new home, you should see your mortgage as part of your planning for any lifestyle change.
#3 Consider more than just interest rates
When reviewing your mortgage options, a common pitfall is to fixate on the interest rate. Of course, you want a competitive rate and it should factor into your decision making, but it can be a mistake to make it your only focus.
Your mortgage should not only align with your lifestyle today, but with what you want to achieve in the longer term. If you get caught up on interest rate, it can actually end up costing you money. You can easily check and compare interest rates online, but it only tells a small part of the story. Who you are, your family situation, your finances and your long and short-term goals are an important part of the discussion that will help determine what is right for you, and that might not be the lowest interest rate loan.
For example, if your finances change and you are in a position to pay your loan out sooner, it might make sense to have a loan with a slightly higher interest rate that lets you pay it out sooner without penalty. Or you might have a lump sum and want to use an offset or redraw facility to reduce your repayments. Taking a loan with the right features and a slightly higher interest rate might see you paying far less over the duration of the loan.
#4 Be prepared to switch when it makes sense
Of course, it’s always an option to speak to your existing lender about matching a competitor’s offer and if they’ll will, it’s often the most cost-effective option. But if they won’t, you should be prepared to switch to the loan that’s right for you.
It’s a common misconception that switching your home loan is difficult or expensive. Today, it’s relatively easy, and, if you are working with a broker, they can facilitate the transfer, making it even easier. Your broker will find the best options for you and help you compare them in detail, taking into account any fees or penalties, and ensuring the loan is aligned with what you want to achieve today and tomorrow.
If you’ve been neglecting your mortgage, or it’s time for a check-up, get in touch to find out how the expert team at Apt Wealth Home Loans can help you explore your options and make sure you have the loan that’s right for you.
General Advice Warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.