Is winter the time to defrost your home loan?

August 14, 2013
Yew Kong Lye

Helpful tips to improve your mortgage outlook

Has your home loan been on ice, sitting stagnant for as long as you can remember? If it has, turn the heat up on your financial goals this winter by getting a home loan health check to assess your loan’s suitability to your current lifestyle and financial circumstances.    When you first took out your home loan, it may well have been perfectly suited to your needs – and it still could be today. But it is well worth considering reviewing your options to make sure you are getting a red hot deal that is matched to your current lifestyle and financial situation Keep in mind that if your circumstances have changed since taking out your loan, you may now be eligible for a different loan type, one that potentially has a lower interest rate, additinal features and better facilities. With low interest rates and increased competition between banks and other lenders, now is a good time to be actively seeking a better, well suited deal.   While online calculators and comparison websites are a helpful starting point when assessing the suitability of a home loan, professional mortgage brokers go above and beyond this by factoring into the assessment borrowers’ individual circumstances to tailor the loan comparison.      To determine whether your home loan is in need of a health check this winter, Ms Williamson recommends asking yourself the following simple questions to get you started. If you answer ‘yes’ to any of them, it might be worthwhile re-assessing your current loan:   Do you know your home loan’s interest rate? You could be paying too much! Make it your business to find out your home loan’s interest rate. A home loan health check could reveal another option that is a better fit for your current needs. Of course, you will need to weigh up the cost versus benefit of switching lenders and/or loan products.   Have you just received a pay rise or bonus? Adding a lump sum contribution to your loan can help to reduce the interest owed and the term of your loan. A home loan health check can confirm whether your current home loan has the ability to make extra repayments. Keep in mind that if you have an offset account or redraw facility attached to your loan, you can still access the extra funds if needed.   Have you recently moved from a single income to a double income? You may choose to use your second income to repay your home loan sooner and/or build up equity to upsize or buy an investment property. Using an offset account could be a good option, particularly if you now have more income to add to the account, which would reduce the overall interest charged on the loan. If your current home loan doesn’t have an offset account facility you may want to review those that do.   Are you looking to extend your family? If you want to lower your loan repayments for a set period of time to alleviate pressure or to use your funds in a different way you may consider switching to an interest-only loan. These loans offer many of the same features as principal and interest loans with the benefit of lower monthly repayments. Again, the cost versus benefit of switching loan products needs to be carefully considered. Do you have plans to upsize or downsize? If you are looking to move to a different dwelling to suit your changing needs, there are a number of options available. Whether you are looking to upsize or downsize, a home loan health check will allow you to determine whether your current loan is still the most suitable or whether there is a better option for you in the market. In either case, a mortgage broker can help you assess your options. 

Posted in: Refinancing

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