The simple mortgage mistake draining Aussie budgets

How long has it been since you’ve done a home loan health check? Five years? Ten? Chances are, it's been way too long. 

Getting complacent about your home loan is a big mistake, and unfortunately, an easy one to make. By not regularly reviewing your current home loan and checking to see if there’s a better deal out there, you could potentially be doing serious damage to your bottom line.

“Sticking with the same home loan for 25 or 30 years is the easy route - but it’s not always the best one. There are potentially tens of thousands of dollars in savings for those who are willing to put in a little bit of time and find a better deal,” says Mozo Director Kirsty Lamont.

Great value home loans in March 2018 - last updated 19 March 2024

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  • Straight Up

    Obliterate, Owner Occupier, Principal & Interest, <50% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.24% p.a. variable
    6.24% p.a.

    Get a low variable rate depending on your deposit with Athena’s Straight Up Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.

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  • Neat Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.16% p.a.

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

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  • Mozo Expert Choice Badge
    Fixed Rate Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a.
    fixed 2 years
    6.24% p.a.

    Secure a low rate and enjoy the certainty of repayments, with the BCU Fixed Rate Home Loan. Save with no ongoing annual fees. Pay up to $25,000 extra during a fixed period (T&Cs apply). Lock in for up to 5 years.

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How much difference could it make?

You might be thinking, how much difference could switching to a lower rate possibly make - after all, there’s only a difference of around 1%, right? Well, let’s look at the numbers.

The current average variable rate from the big banks is 4.64%*. On a $600,000 home loan over 30 years, that means monthly repayments of $3,090 and $512,481 in total interest over the life of the loan.

On the other hand, the lowest variable rate in the Mozo database at the moment is 3.39%. On the same loan as above, that’s $2,658 each month, and total interest of $356,722 over the life of the loan. That’s an extra $432 in your pocket each month and a total saving of $155,759 - not too shabby!

Top tips when refinancing your home loan

1. Compare rates to see what’s out there.

The first step should be to take a look at the home loan offers in the market at the moment and see if your mortgage measures up.

“There are smaller or online lenders out there that you may never have considered or even heard of, and this might be where you find the best offer. That’s where comparison sites like Mozo come in, making it easy for you to compare a range of options side-by-side,” says Lamont.

2. Think about what features you use

“Refinancing your home loan is the perfect opportunity to reexamine what features you really want and use. Things like an offset account or free extra repayments can help you cut down on interest,” Lamont says.

Think about what’s working for you now and what might help you save even more money, then create a home loan wishlist. Once you know what you want, you can look for an option that fits the bill and has the lowest interest rate attached.

3. Budget for any switching costs

One thing to keep an eye on is any extra costs that might come with switching your home loan, such as a discharge fee from your old lender, or an application fee from your new one.

“In most cases, the savings by switching to a better deal will easily outweigh any fees involved, but it is something to think about, and budget for before you take the plunge,” says Lamont.

*Average and lowest rates calculated for a $600,000, variable rate, owner-occupier loan with principal and interest repayments and an LVR of 80%. All rate are correct at the time of writing, but subject to change.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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