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New Year financial resolution No 1: Review my home loan

Adrian Sheahan
February 05, 2018

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The holiday season is now behind us and most of our New Year resolutions have been consigned to the rubbish bin already. 

These resolutions usually revolve around our personal habits: I’m going to lose weight, drink less, stop smoking etc. But how many of us have a look at our finances and in particular, our Home Loans?  Not many!!  So here’s my recommendation for the New Year.  Resolve to undertake a review of your Home Loan and do it every year. 

And here’s the best part, if you use a professional, they will do most of the work for you.  It’s quick and maybe one of the easiest resolutions you will ever have to fulfil.  Here is a quick look at why and how to review your home loan.

Why?

Everyone’s circumstances change from time to time and the lending landscape also changes so it’s inevitable that your home loan at some stage will become too expensive and/or structured in a way that is unsuitable for you. 

 

  • Rates and costs.  You should review your home loan rate at least every two years (every year is better) as products evolve and lenders alter their rate structures from time to time and you could be eligible for better interest rates either with your current lender or failing that, by refinancing to a new lender.   I don’t recommend that you go chasing small improvements in rate every year but if you can save 0.50% on your interest rate, that can add up to tens of thousands over the life of your loan.  The other thing to check is your fee structure.  The annual fee of $395 that many loans attract adds up to over $11,000 for a 30 year loan term.  The Home loan market is a competitive place so you need to make sure you are getting value for that fee.  If not, take action.
  • Interest Rate type.  If things are tight with your cash flow, it may be time to fix the rate on your loan to make sure you are not left in trouble if rates rise.   See what the market is offering and compare that to your loan and the repayments you currently make.  A fixed rate will not suit everyone but it may save you a lot of stress if rates move upwards.
  • Repayment Type.   Are you suited best by Principal and Interest repayments or Interest Only repayments?   There are many factors that influence the answer to that question but what is certain is that lenders are providing discounts for those who are on Principal and Interest repayments, especially if the loan is a Home Loan.   The difference in rate can be over 0.50% so if your loan has Interest Only repayments and you don’t need that structure, a switch will save you heaps.
  • Loan features.  Older loans do not have many of the current loan features such as offset accounts, redraw and the capacity to manage the loan via the internet.   Again, you could save significant amounts of your hard earned money by using these features so ask the question of your lender and find out if your loan features can help you.

The loan interest rate is not the only factor when assessing if your loan is the right one for you but it is a great indicator, so a simple check is well worthwhile. 

How?

OK, so it’s worth having a review of your loan, especially if it hasn’t been done for some time.  But how do you do it and how difficult is it?  Basically you have two ways of going about it.

  1. Make a lot of phone calls to various lenders and find out what they can offer you (including your current lender)  or,
  2. Call a finance professional like a loan broker or the team at Switzer Home Loans and get some expert advice.  At Switzer we do this every day and can usually let you know if your loan is right for you with a 10 minute phone conversation.

A 10 minute phone call has to be the easiest New Year resolution you will ever have so if it isn’t on your current list of resolutions, do it and start this year.

https://www.switzerhomeloans.com.au/

Call us on: 1300 664 339

Published: Tuesday, February 06, 2018


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