Spring is in the air and, as a homeowner, you may already have a ‘to do’ list to prepare for warmer weather to come. As well as cleaning the BBQ and dusting the ceiling fans, we have a suggestion that could mean that the upcoming Summer is your best ever: reviewing your home loan to ensure you’re getting the best deal for you.
Comparing mortgages may not sound that exciting, but the savings you may discover could lead to a nice, big surprise.
It may be worthwhile to review your mortgage regularly, as your circumstances and the market changes over time. You may find the loan that suited you when you bought your home may not be the best fit now.
With that in mind, here’s our five step plan to spring cleaning your home loan.
1. Check your current rate
The first step is to check the rate you’re currently paying, as you’ll need this to compare to available deals.
Whether you receive your mortgage statements in hardcopy or by email, this should be listed at the top of your statement.
If you’re struggling to find your rate, call your mortgage provider and ask them to provide it. If you’re a Qudos Bank customer, the number to call is 1300 747 747.
2. Make sure you know both your interest rate and your comparison rate
The interest rate you see on your statement is only part of the picture when it comes to calculating the cost of your loan.
Some mortgages also include an establishment fee, charged when a loan is taken out, and may also include ongoing fees.
Every mortgage provider is obliged to give a comparison rate when they advertise a loan, which is a useful tool for your comparison. The comparison rate reduces to a single percentage figure the interest rate plus most fees and charges relating to a loan, to give you the true cost of the loan.
It’s worth bearing in mind that the advertised comparison rate is based on sample data and should only be used as a guide. 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.
It can also be a good idea to discuss this with a mortgage broker to make sure that you are basing your decision on accurate information.
3. Consider whether fixed or variable is the best fit for you
When looking for a good deal on a home loan, it’s the interest rate that makes the biggest difference to your repayments - even a small difference in interest adds up over time. One of the biggest decisions when taking out a new loan is therefore whether to choose a fixed or a variable interest rate.
A fixed interest rate stays the same for a set period e.g. five years, at which point it switches to a variable interest rate, or another fixed rate may be negotiated. Fixed rates make budgeting easier as repayments are constant, but the downside is that you won’t benefit if interest rates go down (but you are protected if they go up).
A variable interest rate can go up or down whenever the lender increases or decreases interest rates. Variable loans may offer greater flexibility but can make budgeting harder as repayments vary as interest rates go up and down.
If you're not sure whether fixed or variable is right for you, you might consider a ‘split’ loan, where a portion of your loan has a fixed rate and the remainder is variable.
4. Think about which features you really need
Many home loans now offer additional features, which can provide useful flexibility e.g. offset accounts or redraw facilities. These features can give you the ability to contribute extra to your loan and reduce the amount of interest you pay, but they can also come with extra costs attached. And if you’re not taking full advantage of these features, the extra costs might negate the benefits.
When comparing loans, consider your lifestyle and what options you really need. Which features are 'must-haves'? Which are 'nice-to-haves'? Is it worth paying extra for features you may never use? You may be better off choosing a basic loan with limited features.
5. Check out Qudos Bank’s home loan options as a great place to start
Our award-winning Low-Cost home loan offers an impressive interest rate and features, including:
- $0 bank fees
- Unlimited extra repayments at no cost
- Instant redraw available from within Online Banking
- Free multiple offset accounts.
Loans are subject to approval. Normal lending criteria, terms and conditions and fees and charges apply. Mortgage insurance is required for home loans over 80% and is subject to approval. You should read and consider the relevant Terms and Conditions and our Financial Services Guide available on our website qudosbank.com.au, before deciding whether to obtain any of our financial products or services.
Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305 arranges this insurance as agent for the insurer Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL No 234708. We do not provide any advice based on any consideration of your objectives, financial situation or needs (which you should consider before deciding to purchase or hold any product mentioned). Terms, conditions, limits and exclusions apply. Before making a decision, please consider the Product Disclosure Statement. If you purchase this insurance, we will receive a commission that is 10% of the premium paid for each policy. See our Financial Services Guide (available on our website) or ask us for more details before we provide you with services.
Published September 2019