Your home loan is one of the biggest financial commitments you’ll ever make, so it makes sense to try to save money where you can. One of the most effective ways of saving money on your home loan is to refinance or ask your lender for a better deal.
There’s a lot of competition between lenders when it comes to mortgages, which means they are continually releasing better deals for home owners. By regularly reviewing the mortgage for your home or investment property, you give yourself the opportunity to switch into a new loan that is either more affordable or one that better suits your needs.
This can potentially save you thousands of dollars in interest repayments and give you an opportunity to better structure your finances, so that you are working towards your financial goals.
When should you review your mortgage?
As a general rule, you should review your mortgage every one to two years. This can be done as part of your annual budget or when you sit down to review your other household expenses, such as your insurances or phone plans.
There are other times when it is worthwhile reviewing your home loan and these include:
- When you wish to consolidate debt
- As your savings goals change
- When you need access to new loan features
- When you no longer require some of the features of your loan
- Your financial circumstances change
- When a fixed interest term is about to expire
- When you need to use your loan as equity to borrow more money
- You aren’t happy with the service from your current lender
When reviewing your loan, the best place to start is by asking your current lender if they can offer you a better deal. See what your lender can do for you and then take the time to compare this offer with loans from other lenders. Once you have more than 20% equity in your home, you will be able to access some very competitive rates.
Related: How to choose the right lender
Questions to ask when reviewing your mortgage
Knowing what you want from your new mortgage will help you to identify the loan that’s right for you. Before you start researching loans, make a list of the things you need from your mortgage, such as an offset account or loan portability, and also make a list of your financial goals.
Once you ready to start researching and comparing loans, remember to look beyond the interest rate. Some loans with lower interest rates may have higher fees, which is why you should be comparing the lifetime costs of a loan, as this takes into account all of your loan expenses.
When comparing loans, ask the following questions:
- Would I prefer to borrow from a big bank or smaller lender?
- Does the loan offer the features I need and what are the fees associated with these?
- Are there any exit fees on the loan?
- What are the costs of establishing the loan?
- Am I happy with the service provided by the lender?
Once you have found a loan that is suitable, the process of switching loans is relatively straightforward, and the savings you stand to gain will make your time investment worthwhile.
If you haven’t reviewed your home loan in some time, there is chance you are paying too much. To work out whether refinancing is the right decision for you, download our refinancing worksheet.