We get it. Life is busy.
Between work, family, and everything else on your plate, your home loan probably isn’t at the top of the to-do list. It’s set up, the repayments are coming out, and nothing has gone obviously wrong. So why not leave your loan as it is?
Here’s the thing: staying with the same loan out of inertia is one of the most common and costly financial mistakes Australian homeowners make.
The mortgage market is competitive, lenders regularly release better deals to attract new borrowers, and your own financial situation has almost certainly changed since you first signed up for your home loan.
A regular loan review can save you thousands of dollars. Sometimes tens of thousands, if your loan is sizeable and you’ve had it with the same lender for a number of years.
Lenders routinely offer their best rates to new borrowers .
Existing borrowers who don’t ask, don’t get.
A review is how you ask.
What happens if you never review your loan?
When you first take out a home loan, you generally shop around and negotiate the best deal you can find at the time. But that rate doesn’t stay competitive forever because lenders regularly update their product offerings and pricing.
The rate you secured three or four years ago could now be 0.5% or more above what a comparable lender would offer a new borrower today.
On a $600,000 loan, that’s roughly $3,000 a year in extra interest.
Or, perhaps more alarmingly, an extra $90,000 over a 30-year loan term.
The borrower who reviews their loan every couple of years and refinances when the numbers stack up, almost always ends up in a better financial position than the one who never does.
Four signs it’s time to review your loan
1. It’s been more than two years since you last looked closely at your loan
2. Your fixed rate period is about to expire, or has recently expired
3. Your property value has increased
If your property has grown in value since you purchased it, your loan-to-value ratio (LVR) may have improved significantly. Lenders price risk partly based on LVR, meaning that borrowers with lower LVRs (i.e. more equity) typically qualify for better interest rates.
If you were paying LMI or a higher rate because you had a small deposit when you bought, your situation may have changed considerably. You could now be in a position to refinance onto a much more competitive rate.
4. You’ve never really looked at your loan features
Many borrowers don’t fully understand what their loan does and doesn’t include. Do you have an offset account? Are you using it effectively? Can you make unlimited extra repayments? Is your rate actually competitive, or have you just assumed it is because when you took out the loan, you just walked into your local bank?
Sometimes a home loan review reveals that it’s not just the rate that could be better, but the overall loan structure itself isn’t working as hard as it could for you.
‘But I don’t have time for this’
This is the most common pushback we hear. And look, we completely get it!
Refinancing sounds like a lot of paperwork, a lot of calls to the bank, and a lot of your time.
The reality is though that working with a mortgage broker makes the process far less demanding than most people expect.
We do the comparison work for you. We manage the application process. We liaise with lenders and coordinate the transition. And for most borrowers, the time commitment is a couple of conversations and some document gathering.
Compare that to the cost of not reviewing (which is potentially costing you thousands of dollars a year in excess interest) and the maths is pretty clear. An hour or two of your time could save you more than many homeowners earn in a fortnight.
You don’t need to refinance every time you review either. Sometimes the outcome is reassurance that you’re already on a good deal. You won’t know that unless you take a closer look!
What does a loan review cover?
When we sit down with clients for a loan review, here’s what we typically look at:
- Your current interest rate — compared against what’s available in the market today for a borrower with your profile.
- Your loan features — are you getting the most out of your offset account? Could you benefit from a redraw facility? Are there features you’re paying for but not using?
- Your loan structure — is the split between fixed and variable still appropriate? Does it still match your goals?
- Your equity position — has your property grown in value? Could a lower LVR unlock a better interest rate?
- Your repayment strategy — are you on track to pay the loan off in line with your goals? Could small changes to your repayment amount make a meaningful difference long-term?
- Your broader goals — are you thinking about buying an investment property, renovating, or accessing equity? Your loan structure should support what comes next.
How often should you review your home loan?
A good rule of thumb is at least every two years, but can be sooner if something significant changes in your life or in the market. Many of our clients check in with us annually, which means they’re never far from knowing whether their loan is still competitive.
One more thing
It’s worth knowing that your existing lender can sometimes offer a better rate without you having to switch banks. You don’t always need to refinance to get a better deal either.
You’ll never know unless you take a closer look. We can do that for you, by initiating a home loan review.
If you haven’t reviewed your home loan in the last couple of years, now is a great time to start. (We’ll do the heavy lifting!)
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
