With lots of Aussie homeowners enduring multiple back-to-back interest rate rises – and experts predicting more to come in late 2022 – it’s more important than ever that you are getting the best deal possible for your home loan.
So – what do you need to look for?
A great home loan isn’t just about getting the lowest-possible interest rate. It all comes down to finding the right product for your home or investment – and – of course, getting the best deal you can.
It's always helpful to consult your broker or bank in the process too.
Here are some key points to consider when picking your next home loan:
An offset account is brilliant – so check if your loan has an offset option, it could help you reduce your interest and pay off your loan faster.
It should fit your budget – Moneysmart recommends that you look out for a home loan that you can afford to pay off in the shortest period.
Choose your style – variable for flexibility, fixed for stability or a mix of the two so you are covered potentially for both.
Flexibility goes a LONG way
Our lives are constantly changing so what may suit you today may not tomorrow – especially over 30 years.
Some important features that you might want to have are:
The ability to pay more – by making extra repayments, you can pay off your mortgage quicker. Just make sure you are aware of any penalty fees that may apply.
A redraw facility – can be really useful in case of an emergency, job loss or an entirely necessary holiday. Having the ability to access the additional repayments you’ve already made on your home loan could be priceless.
Being able to split your loan – into both variable and fixed could allow you to hedge your bets and provide partial protection against further interest rate hikes.
Extra benefits – can come in pretty handy if you pick the ones that suit you. Right now, ANZ is offering Qantas Points, NAB is promoting a cashback deal and Commonwealth Bank is advertising three years of free internet.
The freedom to switch repayment cycles – the ability to change from monthly to fortnightly repayments could cut years off your home loan and save you thousands.
Equity – it's also really worthwhile to find out if your lender will let you draw down on your equity to do renovations, invest in shares, pay a deposit on a new home or buy a new car.
Yes please to friendly service
Last, but definitely not least, nothing beats good customer service. For most of us, our home is our biggest asset and so it makes life much easier if your loan is with a company you like.
We recommend you check if your mortgage has these important tools:
Regular updates – there is nothing worse than finding out you are in overdraft because your bank didn't tell you about a fee or rate change. Good lenders will send their customers an email, letter or SMS about any changes to their loans.
Great customer service – it's a good idea to ring your potential lender to see what the call centre is like. If you have a question or need something changed it's helpful to know that the lender's team will lend a hand.
A reliable and useable app – most of us do all our banking online these days, so do a dry run and see if you like your new lender's tech.
What to do if you have loan envy?
Not all loans are created equal, and while many banks pass on interest rate rises in full, others are more competitive. Make sure you are comparing the whole market, not just what the traditional banks are offering.
If you find that your current home loan offers very few of the features we've covered, then it could mean it’s time to refinance with a better lender.
You may want to do this if:
Repayments are too high – especially compared to what other lenders are offering.
There’s little to no flexibility – if you are struggling to get your rate changed, refinance or draw down on your mortgage it could be time to switch.
You want to consolidate your debts – can be another good reason to make a move and save yourself money in the process.
The bottom line
The cost of living is still increasing and our budgets are getting properly squeezed, making every single cent count. Picking the right mortgage for you and your life is really important.
So it's a good idea to check once a year to make sure your home loan is right for you. It will also take you one step closer to living the sweet life of being mortgage free.
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The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
