
In February 2022, the total value of owner-occupier home loans in Australia was $16.91 billion. And the average home loan was nearly $600,000. That’s a lot of dollars. And a lot of financial obligation for most Australian homeowners.
So if you’re one of those homeowners (and you probably are if you’re reading this) it just makes sense to ensure you are making the right choice around home loan payments, to avoid paying excess interest or penalties and move ever-closer to being debt-free.
In this article, we’ll talk through our tips to make sure you are in the home loan repayment sweet spot and are not unnecessarily overpaying your mortgage.
Are you overpaying on your home loan?
Sometimes we get in a loan paying habit, and we forget to really check our numbers. But over time things can change – whether it’s interest rate rises, a fixed rate loan rolling over into a variable, new options for refinancing or something else entirely. So, when it comes to determining whether you might be making mortgage overpayments, here are a few signs to watch out for.
You Have a Fixed Rate Loan
If you have a fixed rate loan, it’s a good idea to revisit your rates at least annually. Fixed rate home loans usually come in terms of one to five years, but often this time can slip by unnoticed. When your fixed rate term expires, you will automatically revert to a variable rate, and this rate can sometimes be higher than what is currently available even with the same lender.
If you don’t follow up on those interest rates you could be paying more than you need to on your home loan.
There’s Been an Interest Rate Rise
When there’s been an interest rate rise, the interest rate on your home loan will rise as well. Most of us are aware when this happens, but occasionally an interest rate rise will slip past. When there has been an interest rate increase it will naturally impact the amount of interest that you’ll pay on your home loan. It’s a good idea to follow these changes closely so that you can investigate any opportunities for rate reductions if you do find your rate has risen.

You Haven’t Investigated Refinancing
If you haven’t refinanced your home loan in a few years, there’s a good chance you’re making mortgage overpayments. This is because home loan interest rates fluctuate, and even a minor reduction can save you thousands over the life of your loan.
It’s a good idea to schedule in an annual review of your mortgage with a view to refinancing regardless of interest rate rises or other factors. We think of this as good loan hygiene and it will ensure you’re not making any unnecessary overpayments.
You Haven’t Explored Competitive Interest Rates
Many lenders offer special (and very competitive) interest rates. Sometimes it’s for certain types of loans, sometimes for new borrowers and sometimes they’re just seasonal. It’s a good idea to periodically check to make sure your current interest rate is on par with what other lenders are offering. And you might not need to do a full refinance to lower your rate. Get in touch with your lender and ask for the same competitive rate that other lenders are offering, or that is on offer to new customers.
Are You Paying For Unnecessary Bells and Whistles
Many loans are packed with secondary features, such as split interest rate, no or low fees, a redraw facility, an offset account, flexible repayments and a repayment holiday. But these often come as part and parcel of a higher interest rate. It’s worth your while to make sure you aren’t making mortgage overpayments because your home loan is packed full of features you aren’t using.
Get in touch with your lender to make sure your mortgage features are exactly what you need for your own circumstances. There’s no need to pay for features you don’t need, such as fees for offset or redraw facilities you aren’t using.
Speak to an Expert
If you really aren’t certain whether you are making mortgage overpayments or are confused by what the recent interest rate rise will mean for your home loan, get in touch with us. At Lending Loop, our experts can help you find the best home loan for your situation. We compare loans from more than 40 lenders to help find the best deal for you, to ensure you are on track to achieving your financial goals.