Your home loan would have matched your needs when you first purchased your property, but your initial loan and interest rate may no longer meet your current requirements as circumstances and priorities change over time. Furthermore, interest rates fluctuate, new lenders arise, and more competitive solutions become accessible. A home loan health check is a review procedure that analyses if your existing home loan is the best fit for your current financial situation and lifestyle. The tips in this article is general in nature and does not constitute financial advice, please seek advice from a professional to understand implications that apply to your personal circumstances.
The benefits of getting a home loan health check
Pay off your mortgage sooner
If you don't stay on top of your mortgage, you may unknowingly be overpaying for your home. You may be able to reduce your home loan payments faster and get out of debt sooner. Choosing the right type of loan depending on your situation is key; you should not feel locked down to your original loan.
Secure more competitive interest rates
It is common for interest rates to change in Australia. In the wake of a 10-year fall in interest rates, they are currently rising. As new lenders and mortgage deals emerge constantly, there are more opportunities for you to be able to put more money in your pocket. The interest rate on your loan can be lowered, better terms negotiated, or the loan can be transferred to another lender.
Gateway to move, renovate or invest
A home loan health check determines how much equity you have on your property, allowing you to pinpoint areas in which you may be able to build equity. If you have enough equity, you can use it to fund home extensions or renovations, or even to acquire additional investment properties.
Getting started with your home loan health check
You may want to review your home loan now, as inflation is high and interest rates are rising. A mortgage broker can provide you with a full home loan health check, as well as find the right loan with a competitive interest rate for you. Ready to start your home loan health check? Here are some questions that you may want to ask yourself in preparation.
I’m a first-home buyer
As a first home owner, it’s important to ask what home loan features, fees and charges work for you and your circumstances. As someone who already owns an owner-occupied property, people tend to ‘set and forget’.
Have I been able to repay my mortgage (including interest and fees) easily?
Am I happy with my lender’s service? If not, what needs to change?
Does my loan give me the features I need? If not, what features can I do without?
What are my real estate goals and ambitions (including renovations and changes)?
Does my current interest rate, fees and charges stack up to the ones offered elsewhere?
Is my property's value increasing or decreasing? What is its loan-to-value ratio (LVR)?
Do I have the means to make higher repayments? If so, does my current loan and lender allow me to do this?
What type of variable rate am I on? Do I have a choice between switching to a fixed rate or could I consider a split loan?
I’m looking to invest
As an investor, it is crucial to check on your existing properties before moving to purchase your next. A property investment loan can be repaid with a fixed or variable interest rate, just like a regular loan.
Am I satisfied with my property manager (including their fees and charges)?
What is the current capital growth and rental income of my property? Has it increased or decreased?
Does the property need major renovations or changes in the next 12-24 months?
Have I checked in on my tenants recently? Are they leaving the property in the short term?
Should I refinance my loan? Should I consolidate my loan with others?
Engage the experts
While home loan health checks are an excellent way to refinance your mortgage and review your finances, it is recommended to consult with professionals. A lender or financial adviser can answer any questions you may have about examining your home loan and provide you with the best guidance on moving to another home loan that suits your needs.
We suggest an annual home health checkup. Keep an eye on the Reserve Bank of Australia’s (RBA)’s monthly cash rate announcements.