For the last six years interest rates in Australia have been falling, but with an interest rate rise on the horizon, complacent homeowners will need to carefully review their home loan.
Experts are predicting an interest rate rise, with many agreeing, it’s not a matter of if, but when. So what does this mean for homeowners who have enjoyed decreased interest rates for the past six years?
In a competitive housing market where affordability is a major issue, buyers who have already stretched themselves to get into the market will be hit hardest. Even a small interest rate rise will have a significant impact on those holding a large mortgage.
While some with a home loan will simply adjust accordingly, it will be necessary for all homeowners to review their current home loan to ensure they are getting the best deal.
Australia’s leading non-bank lender, Mortgage House, explains how you can review your home loan and get a better deal.
How do I review my home loan?
A home loan health check is the best way to start reviewing your current home loan. A home loan health check looks at the terms of your current loan to determine if it is still the most suitable option. These loan terms include interest rate, maturity rate, and type of loan. A home loan health check will also consider the equity you have in your property as this could help you get a better deal.
A home loan health check can be performed with a Mortgage House home loan specialist in person or over the phone in as little as 20 minutes. Your home loan specialist can then identify areas where you may be able to reduce your interest rate, restructure your debt to save money, reduce home loan repayments or unlock equity in your home. They can then advise a home loan product that works for you.
If rates are predicted to increase should you fix your home loan?
A fixed rate home loan is chosen for its ability to provide stable and predictable budgeting. Loan repayments are consistent due to a fixed interest rate, which means borrowers aren’t at the mercy of a fluctuating interest rate. In light of recent interest rate predictions many borrowers are looking to the advantages of a fixed home loan.
When comparing fixed and variable home loans, history shows that there is a 50/50 chance of getting it right, so it often comes down to personal preference. If you would like to know exactly how much you are paying each month then a fixed home loan is a good option.
Alternatively, you can hedge your bets both ways with a split home loan which allows you to have a portion of your home loan with a fixed interest rate and the remaining portion with a variable interest rate. If you’re worried about increasing interest rates, but don’t want to miss out on record low variable interest rates, a split home loan can offer peace of mind.
Are you getting the best rate?
A low rate means less interest is payable and that could save you thousands over the life of your loan. Borrowers who settle for their current home loan rate and don’t regularly review their home loan can miss out on big savings.
If you’re not sure how your current home loan rate measures up, look to other lenders and see what they’re offering. This will give you an idea of what interest rates are on offer.
In most cases a lender will be happy to help you and assist with the entire process. For example, Mortgage House will guide you through refinancing and even assist with your switching costs*.
It’s important to look at the interest rate and the comparison rate as this will give you an idea of the fees that are included. You should also consider the home loan features.
Do you need to refinance?
You should consider refinancing your mortgage regularly. There are no rules as to how often you should refinance, but it may take some time to see the benefits of the change.
Certain events should also prompt a review. For example, when the RBA makes changes to the cash rate, your employment changes, if your fixed loan period is ending or when your lender hikes your rate.
A home loan health check will help you decide if you need to refinance. Alternatively an online calculator, like Mortgage House’s Switching Mortgage Calculator can show you how much you would save by refinancing.
Find out if your home loan is really working for you. Chat with a Mortgage House home loan specialist and discover a wide range of home loan options to help you save and pay off your mortgage sooner. Book an appointment with a lending specialist here or call 133 144 today.
* Terms & Conditions apply.
This is a sponsored article.