When you have a toothache you go to the dentist, when your back is playing up you make an appointment with your chiro and when you’ve got the flu a visit to the doctor is often the answer.
But what about when your home loan is suffering a case of the high interest rate?
If you’re like many home owners, giving your home loan a health check is probably sitting in the “too hard basket”. But by being indifferent about your home loan, did you know you could be missing out on considerable savings?
Here at Mozo, we love nothing more than a good home loan savings scenario. So check this one out:
- As of 2015, the average home loan for an owner occupier living in NSW was $437,100. When we put that amount into our home loan repayments calculator with a term of 25 years and the average rate in our database of 4.72%, your repayments would be $2,484 a month. Okay now here’s the part where the savings come in. If you switched to Mozo’s Mystery Bank Deal with a rate of 3.89% your repayments would drop to $2,281 a month and over the term of the loan you would save $13,108 in interest.
Yep, a saving of over $13k is definitely incentive enough to give your home loan a general check up. Here’s how in four easy steps:
Step 1: Assess your current home loan
When you consider most home loans have a term of 25-30 years, there’s a good chance that the healthy home loan you originally signed up for is starting to show its age.
Do you know what you’re currently paying in interest on you loan? If you answered no it’s worth checking what your current rate is and whether you could get a better rate elsewhere (see step 4).
Are you paying a monthly fee because when you took out the loan you needed flexible features like an offset account and line of credit facility? Well, if you are no long using these features it could be time to downgrade to a basic home loan.
Step 2: Work out the refinancing costs
If you decide that your mortgage is in such a bad shape that switching to a newer one is the only way to get yourself into a healthy home loan situation, before you make the switch, make sure you check that the costs of refinancing won’t outweigh the savings made.
For instance, if you originally paid lenders mortgage insurance, if you switch before you own more than 20% of the property value (through the repayments you’ve made or the property growing in value), you could be up for the cost of LMI again because unfortunately it isn’t transferrable.
Other fees to factor in include the discharge fee from your current lender and the upfront fees like the application and valuation fees from your new lender (although you may be able to haggle on these).
Step 3: Consider the interest rate
If you decide refinancing is for you, before you kick off your comparison have a think about what type of home loan you should go for – a variable, fixed or split rate loan.
Often the variable rate option is popular because it comes with flexible features like a redraw facility and offset account but if you won’t be needing these types of features with fixed interest rates at record lows, now could be a good time to fix all or a portion of your loan.
Step 4: Compare
And the last step after you’ve chosen what type of rate and features you’ll go for, is punching in your details into our Switch & Save Calculator, which will show you some of the top deals in the market that will either help you pay off your loan sooner or save you bucket loads in interest.
There you have it, a mortgage check up in four easy steps. Alternatively, if you want some home loan advice from an expert, fill in your details here and our home loan negotiator will help you narrow down the right refinancing loan for you.