Why not start the new financial year with a home loan health check and see if you could be saving yourself money. Put your loan through its paces once a year to make sure it still meets your requirements. Following are four points worth considering.
Am I paying too much interest?
Although the interest rate alone is not the only consideration for choosing a loan, it makes sense to check that you’re not paying more for a product than you need to.
There is always competition between lenders to offer the lowest rate, so even if you had the cheapest home loan a year ago, things may have changed.
Before switching to a lower rate just make sure you take break costs into consideration, or you could end up worse off.
What’s new in my life?
Has your personal situation changed over the last year? Maybe you’ve been promoted, had a pay rise, or gone from contract work into a permanent position.
Different mortgage products are tailored for different situations, so you may be better suited to a different loan.
For example, if you were previously self-employed, but are now a salaried employee, your Low Doc loan could be switched to a lower interest product.
I need to unlock equity?
Over the years you’ll accumulate considerable equity in your home as you repay your mortgage.
But you may be able to tap into the value that’s built up in your home without having to sell. Australians can use equity from their homes to fund many requirements, from putting children through university to increasing assets through purchasing an investment property.
As long as you can service the loan repayments, you may be able to borrow up to 80 percent of the value of your home without having to pay lenders mortgage insurance.
Can I pay off my home loan faster?
Some mortgage products are designed to help motivate borrowers repay their mortgages quickly. If you’re striving to be mortgage free, there may be a more effective product than your existing loan to drive your mortgage down.
A ‘Basic’ loan usually comes at a lower interest rate, but its lack of flexibility may restrict certain mortgage reduction techniques.
Equity lines, off-set accounts, and redraw facilities all allow borrowers to pile extra funds into their mortgage on a regular basis, which may result in taking years off your home loan repayments.