Have you started to wonder whether you’re getting the best deal on your home loan? You’re not alone. With unprecedented competition in the mortgage market and historically low interest rates, more and more homeowners are comparing their options and switching home loan providers. In fact, The Australian Bureau of Statistics reported that the number of refinanced home loans has almost doubled between January 2010 to December 2013.1
What we’re all beginning to realise is that reviewing our home loan regularly is the smart way to ensure the best deal, and there could be big savings to be made by changing lenders. But switching home loans is an important decision, so make sure you do your homework before considering making the switch.
Here are some simple steps to see if switching home loans is the right decision for you.
- Ask your lender for a key facts sheet – This provides all the important information about your loan in a set format, making it easy to compare your loan with others.
- Get quotes from other mortgage providers – You only need to provide your details once, and you’ll receive multiple quotes from different lenders. Ask for a tailored comparison rate which will provide you with a notional interest rate that is relevant to your circumstances and factoring in all known fees and charges.
- Compare the best quotes against your current home loan – Compare interest rates and comparison rates and use a mortgage repayment calculator to get an idea on what your total costs may be. Look at all potential fees, including those that are not built into the comparison rate and other features as well, to see if there are further savings to be made.
- Speak to your current lender – Before switching home loans, let your lender know you’ve found a better deal. With the current level of competition, there’s a good chance they’ll fight hard to keep your business by offering you a different type of loan with a better interest rate, or even reducing the interest on your current loan to entice you to stay.
Things to look out for
The biggest cost factor in switching home loans is the fees you may need to pay, including:
- Exit fees if your loan was taken out prior to 1 July 2011. Any loans taken out after this time will not have exit fees but may still incur reasonable closing costs;
- Break fees if your loan is on a fixed rate; and
- Start-up fees for a new loan.
The benefits of switching home loans
The greatest benefit of switching home loans is the long term savings you could make. Even when you take all the fees into consideration, you could still save thousands with a lower interest rate. Your new home loan could also offer better features like more regular payments, a redraw facility or an offset account – all of which could add up to more dollars in your bank account and less in your lender’s (although some of these may come with a cost).
So what have you got to lose? Even if you don’t switch home loans, comparing your options is worthwhile for the peace of mind of knowing you’ve got the best deal, or for wrangling a better deal from your current lender.
So what now?
So now you’ve made the decision of whether or not to switch, what are the next steps? If anything, this process would have given you a good opportunity to review your home loan and plan out payments in the budget.
But what if something unexpected were to happen and you or your partner were no longer around to pay the mortgage? Do you have a plan in place to help manage mortgage repayments? One plan you can set in place is life insurance.
Life insurance can help ease the financial burden by providing an agreed amount to your family, so it can be used where it is most needed, like paying the mortgage.
To review a range of policies in the one place and find out how much it will cost to you to get cover that suits you, call Choosi today.
- Mortgage holders switching lenders every three or four years, The Daily Telegraph
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