For many, a home loan is a purchase already made, a regular expense that will stick with them for up to 30 years (depending on the home loan conditions set out at the time of agreement). But don’t expect to simply set and forget your home loan.
Your circumstances may change, and the home loan you once thought was the perfect deal might not be so anymore. By running a few checks, you can figure out whether or not your home loan is still the right fit for you.
Bonus Features To Your Home Loan – Are They A Trap?
Find out all of the home loan features that your current home loan may have. These features may seem confusing to the untrained eye, but there are benefits and disadvantages to a home loan containing them.
For example, some home loans may come with redraw facilities, which can be a handy home loan feature if you’ve made extra repayments in the past and need to access that cash for an unexpected expense. Other home loans may instead have an offset account, which is a bank account linked to the loan in which any cash in the account is offset daily against the home loan principal.
These features may sound good but can attract additional fees. Compare the benefits of the feature with what you are actually paying overall to see if it’s worth the cost.
Interest Vs Comparison Rates: Do You Understand The Difference?
Interest can seem like the silent assassin to many a home loan, but it’s important to not be lured into a new agreement by a rate that seems (at first glance) to be lower than it actually is. You should consider two rates when re-evaluating the interest payable on your loan – interest rate and comparison rate.
Interest rate is the annual interest cost for borrowing money but does not consider any fees. The comparison rate incorporates the annual interest rate, as well as most upfront and ongoing fees.
It’s a good idea to use comparison rates as your base for looking at alternative home loans, as they provide a clearer picture of how much money you may actually end up paying.
Ask To Reduce Your Home Loan Interest Rate
It might seem that a lower interest rate on the market is the perfect opportunity to switch home loans – but wait! You can also contact your current lender and inform them that you are considering making a switch and (if you have a good credit rating and more than 20% equity in your home) you may be able to negotiate with the lender from a better position, about your interest rate
Want advice on how you could improve your home loan, or about the repayments to your home loan? Speaking with a mortgage broker or a professional lender may be the best path to take, as they have the expertise to assist you.