A home loan is one of the biggest financial commitments we can make in our lifetime, yet for many of us, once we have a home loan we tend to set and forget.
Prospective home buyers will often research their purchase meticulously. However, once the loan is approved, few people seem to place the same importance on reviewing the features and benefits of their loan to make sure it still meets their needs.
We tend to make sure we are getting the best deals on our insurance premiums, mobile phone contracts and even from our utility providers, so why not our home loans?
Consider this example. A $350,000 loan repaid with monthly instalments ($2,164) over 30 years with an interest rate of 6.29% could see a home-owner pay a total of $429, 085 in interest over the lifetime of the loan.
So, imagine the saving you could make over 30 years just by negotiating a point or two down on your interest rate.
A simple way to get the ball rolling is to ask your lender for a home loan health check or do your own comparison. If you find a better deal elsewhere, you should consider switching banks.
According to a Deloitte survey, Australians’ primary banking relationships are relatively stable. Only a fifth have changed the provider of at least one of their banking product relationships in the last three years.
And it has a lot to do with perception. People still think it is difficult to change banks, but in fact switching banks is now much easier than it was. For sure, there’s a few steps involved to change who you bank with, but these days most lenders will help you through it.
With home loan interest rates increasing lately, the question some borrowers will be asking themselves is: "When will rates go down?"
There are, of course, pros and cons with both fixed and variable rates, so the decision to go either way should be a considered one. And the decision is not always black and white. Ultimately, what borrowers decide will depend on their individual circumstances.
Let’s look at the two types of rates:
As their name suggests, variable interest rates fluctuate as the market changes. They offer flexibility and are perfect for those looking to pay off their loan quickly or potentially pay a lump sum. If this is you, then a variable rate is a great option.
On the flipside, if all you want is peace of mind, a fixed rate might be the way to go. Locking in a rate is ideal for those who want to know what their repayments will be for a set period.
As with all financial decisions, it’s important to read the fine print. Some fixed rate products don’t offer options like flexible repayments or offset accounts, so be careful to check what features do apply.
And don’t forget to check the comparison rates. The comparison rate is a more accurate picture of what the loan will cost over the life of the loan. It includes any additional fees and charges and represents these as a simple percentage. They make it easier to compare rates between financial institutions.
There are a lot of factors to consider when researching a home loan or looking to refinance.
It’s not a question of deciding between a fixed or variable rate – it’s about doing your homework and then speaking with a home loan specialist who can assess your situation and offer you the best value loan that will tick all your boxes. If you get stuck, give our locally based Customer Experience team a call, we'll be super-pleased to help.
This is general information only and does not take into account your personal circumstances. Before acquiring any financial product, you should check if it is suitable for your needs and where appropriate seek independent advice. Bank of us lending criteria, terms and conditions including fees and charges apply. Full details are available on application.
