How often should you review your home loan?

A lot can change in a short amount of time, and your life now may look completely different to what it did when you took out your mortgage. Reviewing your home loan is an easy way to see if your mortgage still meets your needs and, if not, making the necessary changes to ensure you’re getting the best possible bang for your buck. 

Here are some reasons why it’s worth reviewing your home loan:

1. You could save money and pay back your mortgage sooner

By reviewing your home loan you may be able to work out if you’re paying too much, secure a better deal, and save yourself up to thousands of dollars in interest and charges, potentially shortening the life of your loan. 

You may also be able to reduce your repayments and, in turn, have more disposable income each month. These extra funds could be used to make additional repayments and pay off your mortgage sooner, or simply to ease some financial pressures in your day-to-day life.

2. You may be able to adjust your repayment frequency

Another benefit of reviewing your home loan is the potential to adjust how often you make your repayments. 

Let’s say you get paid fortnightly or weekly but your mortgage repayments are monthly – this can make it tricky to budget effectively. Aligning your repayment cycle with your paycheck may therefore help you keep better track of your cash.

3. You may be able to take advantage of new home-loan features

Reviewing your mortgage may also help you discover new home loan features that may not have been available when you first took out the loan. For example, you may be able to access changes to offset accounts, redraw facilities or repayments that could make a real difference in terms of helping you better manage your mortgage so you can work towards paying it off sooner. 

4. The opportunity to consolidate your debts

Refinancing your home loan may allow you to take greater control of your finances and consolidate your debts. Combining some of your personal debts, such as credit cards, with your mortgage could reduce how many repayments you have to maintain, making it much easier to budget.

5. Access your available equity

If your home has risen in value since you bought it, most lenders will allow you to access the equity you’ve built up over that time. Having this extra cash on hand can help fund some of those big-ticket life items you’ve been wanting to tick off, such as buying a new car, renovating your home or jetting off on an overseas vacay.

6. Potential to capitalise on market trends

When interest rates are low, you may be able to lock in a competitive fixed-term rate to take advantage of the dip in the market. This can provide you with peace of mind that your repayments won’t change for an agreed period of your loan.

When reviewing your home loan, you should pay close attention to the interest rate, fees, and features. Have a think about whether they still meet your needs and how they stack up to other home loans on the market.

Negotiate your home loan

From here, you might want to negotiate a better deal with your current lender by bringing a more competitive rate to the table. If they don’t want to lose your business, they may be willing to sweeten the deal to keep you on as a loyal customer. 

Refinance your home loan

If negotiating doesn’t work, you also have the option of refinancing your home loan, either with your current lender or with a new one. 

It’s important to remember that you’re not locked in to your existing lender and can move to another one if it makes more financial sense for you. As always, make sure to do your research first and talk to a mortgage broker if you want an expert opinion on the matter.

Keep in mind that switching lenders may incur certain costs such as mortgage discharge fees, and break costs if you leave a fixed rate term early. Mortgage discharge fees can be a few hundred dollars, depending on the lender. A break cost will depend on how long you’ve had your home loan, your balance, current market rates and the length of the fixed term remaining.  Ultimately, you’ll need to do your research before making the switch so you understand what to expect and aren’t stuck having to foot the bill for jumping ship too soon.

As a general rule of thumb you should check the health of your home loan every year. 

It may be helpful to make this a part of your other regular financial health checks - perhaps around End of Financial Year when you’ve got your tax and other income under the microscope.