Can changing your home loan save you money?

Font Size:

Are household expenses in retirement starting to get you down, but are unsure how they can be reduced? Is scrimping and saving not working?

Recent research by Monash University shows that it is the big items that you need to tackle first. So reducing your home loan is probably where you’ll make the most headway most quickly. Today we tackle the five steps involved in refinancing your home.

1. What do you hope to achieve by switching mortgage lender?
The first step is to work out exactly what it is about your current mortgage arrangement that is making you unhappy. Is it the interest rate that your provider charges? Or is it another aspect, such as the fees, the loan term length, or the service that you receive? Once you have identified the reasons, then it is important to consider whether they are significant enough to warrant the work involved in refinancing.

2. Fully understand your current mortgage
Having worked out why you wish to change your home loan, the next step is to make sure that you fully comprehend your current loan. This second step is probably the most critical of all. If you don’t fully understand your current arrangement then you’ll have little hope of being able to compare it to a new mortgage offer. Also, it may be that you don’t have to change mortgage lender to get a better deal, you may just have to make more of the benefits of your current home loan.

Understanding your current mortgage arrangement means being aware of, and making sense of, all the terms and conditions attached to the loan. If you don’t have a current statement, contact your lender for a copy (note – there may be a cost involved). Then take the time to sit down and write down, in your own words: the amount owing, the interest rate that you pay, the anticipated final payment date, and the total amount of interest that you’ll pay. It’s also very useful to consider the current valuation of your property and your total debt. Does this scare you? Could you get a better deal elsewhere?

3. Compare
Fortunately, online tools have made comparing home loans incredibly quick and straightforward. One such online comparison website is RateCity. Using its search function you can browse the different home loan options, narrow them down to the best few, and then compare the key aspects of these loans. The search will advise, and compare, the following information:

  • type of home loan
  • advertised rate
  • comparison rate
  • monthly repayment
  • estimated up front fees.

If you would like further information about a specific loan, RateCity will link you to the relevant website. And there is the very handy feature that allows you to see a graph comparing a selected home loan with those from any of the big four banks.

One really important aspect to factor in to your considerations is the various costs involved with changing home loans. These usually include both charges from your current provider (e.g. an early exit fee, a break cost) and your new provider (e.g. application fees, new account fees). As these costs can add up to a few thousand dollars in some cases, it’s crucial that you are aware of all the possible fees before you undertake the process of switching loans.

4. Get your paperwork and financials organised
Once you have made the decision to change your mortgage, you will have to get all the relevant paperwork in order. Make sure that you have your statements, details of investments, income and expenditure together. You’ll also need to have information on your credit history. It’s important to check your credit rating plus any credit card limits, as the latter will be counted as debt by the bank. You may wish to think about reducing your debt, even slightly, before switching home loans.

5. Broker or bank?
The last thing to consider is how you will organise your new mortgage – whether you will use a broker or deal directly with the bank. This will most likely depend upon your employment/ retirement status and financial situation. Using a broker, such as Aussie or Mortgage Choice, can make the process simpler. Brokers will generally have a broad knowledge of which banks are most likely to offer a loan based on your particular situation. Brokers can also suggest the best way to compile your information so that no time is wasted by a lender requesting further details. However, if you are confident that you have chosen the best option, then going direct to the bank, usually via a specialised mortgage officer, may be your preferred course of action.

Whether or not you decide that moving home lender, or changing your mortgage, is beneficial, reviewing and comparing your current arrangement is often a worthwhile experience. If you do choose to change your home loan, it is crucial to make sure that you will receive a better deal and save by switching.

Disclaimer
All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances. 

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

2 Comments

Total Comments: 2
  1. 0
    0

    I have commented on this B4.
    Don’t go near a big bank, unless you like throwing your money down the toilet. Find a GOOD CREDIT UNION. You will save heaps over a term. Please Switch now. I really mean it. U will save an amazing anount. Please inquire. Go to a good C.U. tho.

  2. 0
    0

    Hello,

    Have you been struggling financially? Have you been trying to get a loan at low rate? Do you need the help of a private lender to help you get loan? Do you need loan to finance your estate or refinance your mortgage? Have you been planning to start a new business or expand an existing one? Are you a student that have been thinking hard for where you can get a student loan? We also render auto loan to trucking companies and truck drivers. Our services are also reachable to those who are business men and women. We offer all kinds of loan and we make it easy to transfer no matter the amount you need and your location. We offer all these loan services at a very cheap rate of 3%. Do not be afraid to apply because we offer loan in all currencies. We are reachable at ([email protected])

    If you are interested in the loan, you are to fill the following details to start the loan process.
    Borrower’s Information.
    1. Full Names :……………….
    2. Address :……………….
    3. State :……………….
    4. Country :……………….
    5. Telephone :……………….
    6. Gender :……………….
    7. Marital Status :……………….
    8. Occupation :……………….
    9. Monthly Income :……………….
    10. Loan Amount Needed :……………….
    11. Loan Duration :……………….
    12. Loan Purpose :……………….
    13. Have you applied before? :……………….

    You are expected to apply with the correct details so that we will send you the loan terms and conditions.

    Regards,
    Rogers.


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Diseases

Types of polyps and what to do about them

Polyps are clumps of cells that grow inside your body. While most polyps aren't dangerous, some can develop into cancer....

Finance

How SMSFs invested in 2020 - and what this means for 2021

The size of the self managed super fund (SMSF) market now represents one-quarter of the Australian superannuation industry and sits...

Technology News

Would you let AI choose your partner?

David Tuffley, Griffith University It could be argued that artificial intelligence (AI) is already the indispensable tool of the 21st...

Food and Recipes

How to spice up hummus

Few things are as universally loved as hummus. A blend of chickpeas, lemon, tahini, garlic, olive oil and cumin, whizzed...

COVID-19

Intensive care during COVID like a 'delirium factory', study finds

An international study of COVID-19 treatments has found patients admitted to intensive care early in the pandemic were treated by...

Fitness

The surprising health and fitness benefits of golf

Recently, many have had to rely on walking or virtual fitness classes to keep going with their favourite sports and...

Finance

Five smart moves for empty nesters

So, the kids have moved out, your home is finally yours again and you have ascended to the rank of...

Lifestyle

Why you turn down the radio when you're trying to park your car?

When you're looking for a destination, you might need to cut down the volume. Shutterstock Simon Lilburn, University of Melbourne...

LOADING MORE ARTICLE...