When you first took out your home loan, you probably did a significant amount of research by comparing deals, reading customer reviews and speaking to friends and family. But alas the years have slipped by and you continue to make your monthly mortgage repayments without a second thought. Sound familiar?
Well, this mortgage mistake could be costing you big time.
Mozo ran the numbers on a $500,000 loan to see how much home loan loyalty was costing Aussies and the findings amounted to a small fortune. Just check out the table below:
|Average big 4 rate loan at 5.03%||Best rate loan at 3.86%||Difference|
|Interest paid over 25 years||$379,509||$280,206||$99,303|
As you can see we found a borrower with an average big 4 home loan would pay $99,000 more over a 25 year term than a homeowner that signed up with the lowest rate loan in our database – that’s a significant difference of around $4,000 each year.
Tips for avoiding the price of home loan loyalty
If you think you might be paying the price of home loan loyalty, check out these tips to save yourself a bundle:
1. Conduct an online home loan comparison
With home loan interest rates sitting at record lows, there are plenty of competitive offers around. But before you go for the first mortgage, from a bank with the best online TV jingle, take some time to compare deals online. That way you’ll be able to see what everyone from the big banks to the smaller online lenders (without the fancy marketing budget) have to offer.
2. Consider the switching costs
If you do find your home loan isn’t matching what’s on offer from competitor providers, before you make the switch make sure you weigh up the costs of refinancing. The typical switching fees – which usually range from $500 to $1,000 – include a discharge fee charged by your current lender and some upfront fees like an application fee by the new provider. But the good news is that you’ll make up these costs in no time from the savings made in repayments.
3. Create a home loan shopping list
While everyone loves a great rate loan, don’t forget to also consider other things like the features you’ll want in your new loan (e.g an offset account and extra repayments facility). These types of features could save you a bundle in interest in the long run.
For instance, using the same scenario as above our extra repayments calculator shows an extra repayment of $200 per month would reduce the interest payable by $35,506, as well as the life of the loan by 2 years and 10 months. Add that to the savings made by going for the lowest rate loan in our database and that’s a whopping $134,809 saved in interest over the life of the loan!
Wondering how much you could save by ditching home loan loyalty? Our Switch & Save Calculator will show you just how much or if you would like to speak to one of our home loan negotiators that will haggle a great refinancing deal on your behalf fill in your details here.