You probably compared home loans carefully when you bought your property.
You looked at the interest rate, repayments, loan features and lender. Perhaps you used a broker to compare options and structure the loan.
Then settlement happened.
Years passed.
The loan kept being paid every month, and unless something went wrong, there may have been little reason to look at it again.
But a home loan that suited you three, five or ten years ago isn’t automatically the loan you’d choose today.
Your loan balance has changed. Your property value may have changed. Your income may be different. Your family circumstances may have changed, and the home-loan market certainly doesn’t stand still.
For homeowners in Newcastle, a home loan review is an opportunity to ask a simple question:
If I were choosing my home loan today, would I still choose this one?
Start With Your Current Interest Rate
Do you know what rate you’re currently paying?
Many homeowners know roughly what their mortgage repayment is but couldn’t tell you their actual interest rate.
Find it.
Then look at whether the lender is offering different rates on comparable products, including to new customers.
That doesn’t automatically mean you’re entitled to another customer’s rate or that another loan is better. Loan features, fees, loan-to-value ratio, borrower circumstances and product differences can all affect pricing.
But knowing your current rate gives you a starting point.
You can’t assess whether the loan remains competitive if you don’t know what you’re paying.
Your Lender May Be Able to Reprice the Existing Loan
A home loan review doesn’t automatically mean refinancing.
Sometimes the first conversation is with the existing lender.
Depending on the lender and circumstances, it may be possible to request a pricing review or reprice of the existing home loan.
If the lender offers a better rate and the existing structure still suits you, remaining where you are could be worth considering.
There may be no reason to move a perfectly suitable loan simply for the sake of changing lenders.
But if the existing lender won’t offer a competitive position, we can then look more broadly.
A Lower Rate Doesn’t Automatically Mean You Should Refinance
This is important.
Suppose another lender advertises an interest rate below your current rate.
That catches your attention, but the interest rate is only one part of the comparison.
There may be:
application or establishment costs
valuation costs
discharge fees
annual package fees
different loan features
different offset arrangements
different repayment structures
costs associated with changing lenders
The question isn’t simply:
“Which lender has the lowest rate?”
It’s:
“Does changing the loan leave me in a better overall position?”
Small Rate Differences Can Matter on a Large Mortgage
When the loan balance is substantial, even a relatively small interest-rate difference can affect the amount of interest charged.
Imagine two otherwise comparable loans with a meaningful difference in rate.
The dollar impact depends on the loan balance, remaining term, repayment structure and how long you keep the loan.
This is why a review should use your actual numbers rather than broad statements about how much somebody could save.
Your mortgage isn’t an average mortgage.
We need to look at yours.
How Much Is Your Property Worth Now?
Your property value can influence the refinance conversation because lenders consider the loan relative to the property’s value.
Suppose you originally purchased with a high loan-to-value ratio.
Several years later, you may have reduced the balance while the property value has changed.
That could put you in a different lending position.
Conversely, don’t assume a property has increased in value by a particular amount simply because neighbouring properties have sold strongly.
The value a lender uses will depend on its valuation process.
Your Income May Have Changed Too
Perhaps you’ve received salary increases since taking out the mortgage.
Maybe you’ve changed employers, become self-employed, reduced hours, started a business or moved from one type of income to another.
Those changes matter because refinancing is a new credit application.
You aren’t simply transferring the existing loan from one lender to another.
The new lender needs to assess the application under its current lending criteria.
A borrower who qualified for their existing mortgage years ago isn’t automatically guaranteed to qualify for the same amount today.
What If Your Property Has Increased in Value?
An increase in property value may create equity.
That can open a completely different conversation.
Perhaps you’re considering renovations.
Maybe you’re planning to purchase an investment property.
You might want to understand whether equity could contribute towards another property purchase.
Or perhaps you simply want to know where you stand.
A home loan review doesn’t require you to borrow more.
Sometimes understanding the current equity position is useful even if you decide to leave everything exactly as it is.
Be Careful About Extending the Loan Term
This is one of the biggest traps when comparing refinance repayments.
Imagine you’ve already been paying your home loan for eight years.
A new lender offers a lower repayment, but the comparison assumes a fresh 30-year term.
Part of the repayment reduction may come from spreading the debt over a longer period, not simply from obtaining a better rate.
That can potentially increase the amount of interest paid over the life of the loan.
When reviewing a refinance, look at the remaining term on your existing mortgage and compare the alternatives properly.
A lower monthly repayment isn’t automatically a lower-cost loan.
What About an Offset Account?
An offset account can be valuable for borrowers who keep meaningful cash available.
But don’t choose a home loan feature simply because it sounds useful.
Ask whether you’ll actually use it.
Some products may have fees or pricing differences associated with their features.
If you regularly maintain savings, an offset structure may be worth considering.
If the account will usually contain very little money, another product structure may potentially be more suitable.
The right home loan isn’t necessarily the one with the longest feature list.
It’s the one whose features match how you manage your money.
Fixed, Variable or Split?
Your preferences may have changed since you originally borrowed.
Some borrowers value flexibility.
Others prefer greater repayment certainty.
Some use a combination of fixed and variable lending.
There isn’t one structure that is automatically right for every homeowner.
If you’re currently within a fixed-rate period, refinancing can also involve break costs. Those costs need to be established before deciding whether changing the loan makes sense.
Don’t assume you should wait or move without first understanding the actual numbers.
What If You Have Several Loans?
A home loan review becomes particularly useful when the lending structure has grown over time.
Perhaps you now have:
your original home loan
a separate renovation split
an investment loan
a line of credit
another property loan
The rates might be different.
The repayment types may be different.
The loans may even sit with different lenders.
This is an opportunity to understand why each facility exists and whether the overall structure still matches what you’re trying to achieve.
Where investment or tax considerations are involved, speak with your accountant or registered tax adviser before restructuring debt.
Debt Consolidation Needs More Than a Repayment Comparison
Some homeowners consider using available equity to consolidate personal loans, credit cards or other debts into their mortgage.
That can potentially reduce the immediate monthly repayment because home-loan debt is often repaid over a much longer period.
But stretching short-term debt across a long mortgage term can increase how long you remain in debt and potentially change the total cost significantly.
If debt consolidation is being considered, compare the term as well as the rate.
The objective shouldn’t be to make debt look cheaper by making it last much longer.
Don’t Refinance Just for Cashback or an Incentive
Lenders may occasionally offer incentives to attract borrowers.
An incentive can be useful, but it shouldn’t turn an unsuitable loan into a suitable one.
Look at the ongoing rate, fees, features, loan structure and expected costs after the incentive has been received.
A home loan is a long-term financial commitment.
A short-term promotion should remain a relatively small part of the decision.
When Is a Home Loan Review Worth Doing?
You don’t need to review your mortgage every week.
But there are sensible trigger points.
A review may be worthwhile when your fixed period is approaching its end, you’ve held the same loan for several years, your financial circumstances have materially changed, you’re considering another property, you’re planning significant renovations or you simply don’t know whether your current rate remains competitive.
You can also review the loan and decide not to change anything.
That’s still a useful outcome.
What Should You Have Ready?
A review can start with surprisingly little information.
Tell us your approximate loan balance, current lender, interest rate, repayment, property value and what you’re trying to achieve.
If the review progresses towards an application, considerably more information and documentation will be required.
But you don’t need to gather every document you own simply to start the conversation.
First, establish whether there is something worth investigating.
Home Loan Reviews in Newcastle
If you’ve had the same Newcastle home loan for several years, don’t assume that because the repayments continue to come out each month the loan is still the best fit for you.
Find your current rate.
Look at your remaining balance and loan term.
Consider whether you’re actually using the features you’re paying for.
Then compare the existing loan with the alternatives available for your circumstances.
Sometimes refinancing may make sense.
Sometimes the existing lender may improve its pricing.
And sometimes the review confirms that staying exactly where you are is the better decision.
Want Us to Review Your Home Loan?
Send Thrive Broking your current lender, approximate loan balance, interest rate and estimated property value.
We can start by looking at your existing position and whether there appears to be a reason to investigate repricing or refinancing further.
You don’t need to decide that you’re refinancing before having your home loan reviewed. The first decision is simply whether your current loan still deserves to keep your business.