Is Now the Best Time to Review Your Home Loan?
Financing your home is one of the biggest commitments you will make in your lifetime. As such, it is essential to regularly review your home loan to ensure it is adaptive to your changing circumstances and the ever-changing economic climate.
Individuals who are paying off an existing home loan are likely to benefit the most in the current market. Australian property prices saw a sharp drop in value during the pandemic, but reports from a number of leading industry bodies are expecting this to change in the coming months.
Ideally, a home loan should be reviewed every year. So, making time to reconsider the current market, products available and prevailing interest rates will help you determine better deals on loans. Individuals who decide to take advantage of the current market stand to gain the most from a home loan health check.
Here’s what you need to know.
How do I check the health of my home loan?
You can check the health of your current home loan by following these quick steps:
- Review your interest rate
Comparing your home loan interest rate to what’s currently available in the market provides a good indication of whether your home loan is competitive or if better options need to be considered.
- Assess current repayments
Interest rates have dropped a staggering amount since the beginning of the pandemic, which has significantly reduced the amount required to be repaid monthly. By reassessing current repayments, homeowners are likely to minimise the cost incurred on a month-to-month basis as well as improve the health of their mortgage.
- Check fees and charges
Hidden fees and overpriced administration costs can all add to your home loan, impacting your ability to pay it off. Checking for fees and charges across the lifespan of your mortgage is a smart way to assess whether a particular lending provider is the right choice for you.
- Check if your fixed term is ending
Early exit fees can be sizeable, particularly if you have a large proportion of your mortgage to pay off. Fortunately, if your fixed rate term is ending, you can take advantage of low fixed interest products and variable rates.
- Assess level of income and changes to financial circumstances
Your life has probably changed significantly since you first took out a home loan. Ensuring that your current repayment plan is sustainable or providing you value starts with examining how much you are earning, what your plans are for the foreseeable future and whether your home loan aligns with it.
- Check for better home loan features
As your circumstances change, you may need more from your loan than a low interest rate. To get the most value, check to see if your loan has the option to be redrawn or additional repayments can be made.
What are the benefits of performing a home loan review?
Your existing mortgage may be underperforming in a number of areas apart from an uncompetitive interest rate. A home loan review can save you a lot of money over time and provide value with tailored features that match your financial situation.
The benefits of a home loan review include:
- Securing a rate that’s right for you – You might benefit from switching to a fixed interest rate from a variable rate, to lock in a low interest rate before prices surge. Additionally, if your current fixed interest rate is set to expire, you can ultimately expect to receive a better rate, if you refinance now.
- Access to more features – A lending product should be tailored to your current situation. If your personal or financial circumstances change such as purchasing an investment property or deciding to start a family, a home loan review helps analyse available lending products to account for your changing needs.
- Property valuation – As the value of your property increases, so does the level of equity you have available to make improvements to your property. A home loan review can help you identify whether the value of your property has increased, increasing the amount of money that you can borrow against the equity of your home.
- Debt consolidation – If you are experiencing high interest repayments from existing credit cards or other loans, performing a review helps consolidate your existing debts into your home loan.
Why is now the best time?
The RBA has flagged that the national cash target rate is set to remain at 0.10% until the first half of 2023, bringing up the rate of fixed and variable lending products. However, despite the best efforts of the RBA, interest rates have already begun to rise. This is due to increasing competition between banks and second tier loan providers, with comparison rates rising from 2.0% to 2.5% on fixed rate mortgage products.
These rates will likely continue to rise well into 2022 and early 2023, meaning the best time to secure a low interest refinancing option is right now.
How to secure the best deal?
While the option to compare what products are available in the market on your own is always available, leveraging the knowledge and expertise of a mortgage broker can provide you with access to a number of hidden products and flexible options at competitive rates.
If you require any information about performing a mortgage review or refinancing your home loan, please speak to the team at Provide Finance today.