There are a few things you should do every year – get a wellness check from your GP, get a check-up from your dentist and complete an annual home loan health check.
Of course, most of us don’t think of our home loan in those terms. (Instead, we tend to set and forget!) But a home loan review can help you to ensure that you’re getting the most from your money by helping you work out if the products, features, and interest rate of your current mortgage are meeting your needs and circumstances.
If it’s time to break up with your home loan for health reasons, you’ll be able to make an informed decision about which home loan is better for you.
Why Get a Home Loan Health Check
The short answer is that they can save you money! An annual home loan health check could save you tens of thousands of dollars on the total cost of your mortgage. But they also have a few other advantages too.
Improved Finance Fitness
Another benefit of a home loan health check is that you’re more likely to improve your overall financial fitness by getting on top of other loans and assessing your finances. Your review could lead to a mortgage that better suits your financial situation. This could be one that has more flexible repayment options. Or it could mean splitting your loan between fixed and variable interest, or consolidating other loans into your home loan.
How To Do a Home Loan Health Check
To complete a home loan health check, all you need are a few documents, a bit of time to review of your current mortgage and a little research about alternative home loan options. You can DIY these steps or speak to one of our lending specialists. Either way, you’ll need to consider a similar set of information.
1. Know Your Current Mortgage Interest Rate
Knowing your current mortgage interest rate is key, as it will potentially be the biggest deciding factor in whether your home loan is healthy or not. If you’re unhappy with your current rate, or if it’s causing your own health to suffer through stress, it’s time to switch to a loan with a lower interest rate.
If your current home loan repayments are manageable and you feel good about them, you may still benefit from switching to a home loan with a more competitive interest rate.
2. Determine If Your Fixed Term Is Coming to an End
If your home loan has a fixed term interest rate – is the term coming to an end? You would most likely then be automatically rolled over to your loan’s set variable rate – which may be higher than market rate. It’s time to review your home loan health and know what other options you have.
3. Are You Paying ‘Unnecessary’ Fees and Charges?
Home loans come with fees and charges for a range of things. Assess whether you’re paying fees and charges for any services, features or products you’re not using. Or whether you’re just paying more fees than you might with another product. Look for home loans with low or even no fees – you could save hundreds of dollars each year.
Be aware that if you do switch loans, there could be a fee for early discharge of your loan.
4. Know Your Repayment Capacity
Looking at your current income and financial commitments, can you increase your home loan repayments or make additional repayment amounts? Can you link an offset account to your mortgage? Any additional payments you make can pay off your home loan more quickly, potentially saving you thousands in interest.
5. What’s your current equity?
How much equity do you have in your home, and has your home increased in value? You may be able to leverage the equity in your home to finance a renovation – or even purchase an investment property. But if you don’t check, you won’t know!
6. Be Honest With Yourself About Your Circumstances
Any significant change in your personal circumstances can impact your home loan health. Marriage, children, divorce or a change in your employment status can all impact your repayment capacity. They might also drive the need for different features in your home loan.
7. Are You Happy With Your Current Lending Institution?
It’s OK to take a close look at your current lending institution and consider your options. If your home loan health check has made you realise you have no particular relationship with your lender, your loan is missing features that are important to you or you’re unhappy with your interest rate – it could be time to think about refinancing with a different lender.
Speak to an Expert About Your Home Loan Health Check
If you feel like it’s time for a home loan health check, we’re ready to help. Our expert team can talk you through a DIY health check – or do it for you. We’re standing ready to do the legwork needed to review your current mortgage and compare competitive alternatives.