Some of the most common new year resolutions are to lose weight, read more and learn a new skill. Another common resolution people make is to improve their financial position.
That’s why, year after year, many Australians use January as a chance to do a ‘home loan health check’.
A home loan health check is when you evaluate whether your home loan is still a good fit for you, given your current financial position and your future goals.
That’s because although your home loan might’ve been a perfect fit when you took it out, there are seven reasons why it might no longer be your best option.
If you or your partner have increased your salary since you took out your home loan, you might now be able to refinance to a loan with a lower interest rate. Conversely, if your household income has fallen – perhaps because one of you has taken time off work to have a baby – you might want to reduce your repayments by changing your loan structure or extending your loan term.
Since you took out your mortgage, you might’ve changed some of your plans or thought of new goals – such as starting a family, launching a business, building a property portfolio or retiring early. Depending on your circumstances, refinancing to a new loan could make it easier for you to achieve your ambitions.
If you put down a small deposit when you took out your home loan, you might’ve had a limited number of lenders and loan products to choose from. But if you now have more than 20% equity in your home, you could potentially refinance to a better loan – one that might offer some combination of a lower interest rate, lower fees and more repayment flexibility.
Another reason your loan options might’ve been limited when you took out your mortgage is if you had a low credit score at the time. If your credit score is now higher, you might be able to refinance to a better loan.
Australia’s mortgage market is very competitive, with an array of banks and non-bank lenders fighting hard for business. So there’s a good chance that since you took out your mortgage, some of those lenders have found ways to improve their loan products, such as by cutting interest rates or adding features. Also, some of those lenders might be offering special deals to refinancers. As a result, a lender that was a poor option for you before might be a good option for you now.
Similarly, some of those lenders might’ve launched new loan products, which might be a better fit for you than your existing loan.
New lenders enter the market on a regular basis. For example, Shore Financial recently launched a brand called Shore Private, which offers rapid approvals, one-day settlements and low interest rates to qualified borrowers. Refinancing to one of these new lenders might offer you better value than your current home loan.
Why you might want to consider refinancing
The moral to the story is that it’s important to do home loan health checks from time to time, because things change, both in your life and the wider mortgage market. If you signed up for a 25-year or 30-year loan term when you took out your mortgage, it’s unlikely the mortgage would still be a good fit decades later.
A Shore Financial mortgage broker can help you with your home loan health check. When you review your loan, your current circumstances and your future goals, you might discover that your loan is still a great fit. In that case, there would be no need to switch loans.
However, you might discover there’s a home loan out there that is now more appropriate, perhaps because it’s offering a lower interest rate, lower fees, better features or greater repayment flexibility. In that case, it might be worth refinancing.
As part of the process, your broker will explain the pros and cons of refinancing and also crunch the numbers for you, so you can decide if refinancing is suitable.
Shore Financial can help you do a home loan health check. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.
To discuss your options, you can call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.
