With interest rates at an all-time low, property owners can now access some of the best home loan rates we have ever seen. This is encouraging many homeowners and property investors to consider their loan options, particularly if their institution isn’t passing on the full rate cut.
When it comes to your home loan, should you stay or switch? The answer isn’t simple – of course, we all want to pay the least amount of money possible, but there are other factors to consider. Here are our top tips for managing your mortgage and making sure you get the right deal for you, now and in the longer term.
Review your loan regularly
Of course, low interest rates like those we are currently seeing can be a great catalyst to review your options, but you should be reviewing your home loan regularly, regardless. Think back to what you were doing five years ago – from your job to your family and financial situation, you might find quite a bit has changed. A home loan option that suited you then simply may not be the right one for you today.
Reviewing your home loan every three to five years will ensure you have the right loan features and repayments to suit your changing lifestyle. It will also allow you to take a look at any new players who have come into the market in that time, like Neobanks, digital institutions that are now starting to offer home loan products.
Remember that it’s not just about money
In a world where information is at our fingertips and social media gives us access to other people’s lives, it can be easy to get caught up comparing interest rates and feeling ripped off. It goes without saying that saving money is a great outcome, but it’s not the only thing you need to consider. For example, if you have built a trusted relationship with your local bank branch over time, and you feel comfortable with them, that comfort and convenience has a value too.
You also need to think about the features and flexibility you need to support your life goals. For example, if starting a family is in your future or your kids are leaving home, you may want to change your loan to suit these life events. If you have a long-standing relationship with your lender, they might be more likely to meet your needs than a new provider, but not always.
Talk to your current lender
In many cases, particularly if you have a record of making repayments on time, your current lender will be willing to offer you better terms to retain your business.
It’s a good idea to do your research before you pick up the phone:
- Know your obligations: Review the terms of your loan to understand what fees you will have to pay to leave your mortgage. Typically, this will amount to a few hundred dollars in discharge and transfer fees, but if you want to move from a fixed loan to a variable one, it may be considerably more. This doesn’t necessarily mean you shouldn’t switch, you’ll just need to understand whether the savings make financial sense.
- Know what competitors are offering: Have details of the competitors offer on hand, so you can discuss the specific deal you’d like.
Speak to a mortgage broker
A mortgage broker has an excellent view across loan products and lenders, so can save you significant time reviewing options. Beyond simply comparing rates, a mortgage broker will also look at your long and short-term life goals to work out which products will best suit you. In fact, it’s a good idea to maintain a relationship with your broker after you take out the initial loan, because they can alert you if and when there are products that might suit you better, with an understanding of what you personally want to achieve.
The savings can be significant. Recently, I worked with a client, who had a large debt, to refinance to a loan that saved them upwards of $12k in interest in the first year alone, and gave them the option to increase repayments, creating the potential to save a significant amount over the life of the loan.
At the end of the day, there are many loan products out there on the market, with different interest rates and features. You should be looking for the loan with the right combination of financial terms and loan features to support your life goals. The features you need will change over time, so it’s best to review regularly, and, if you can’t get the deal you want, don’t be afraid to switch.
General Advice Disclaimer
The information in this blog is provided by Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) and is of a general nature only. It may not be relevant to your personal needs, objectives or financial circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if the strategies and products are right for you.