As we usher in a new financial year, it’s the perfect time for Australian homeowners to review their home loans. Whether you’re looking to save on interest, optimise your repayments, or unlock equity, a thorough home loan review can provide significant financial benefits. Here’s a step-by-step guide to help you get started.

1. Check Your Interest Rates

Interest rates can make a huge difference in the overall cost of your home loan. Here’s what to consider:

• Compare Current Rates: Start by comparing your current interest rate with those offered by other lenders. Even a small reduction in your interest rate can lead to substantial savings over the life of your loan.
• Fixed vs. Variable Rates: Consider whether a fixed or variable rate suits your financial situation. Fixed rates offer stability, while variable rates might provide more flexibility and potential savings if interest rates drop.
• Check Your LVR: If you Loan to Value Ratio (LVR) has decreased through either your property value appreciating or loan balance reducing, you may be eligible for a further discount on your rate. Ask your mortgage broker to check on this for you.

2. Review Your Repayments

Reviewing your repayment structure can help you pay off your loan faster and reduce interest costs:

• Fortnightly vs. Monthly Repayments: Switching from monthly to fortnightly, or even weekly, repayments can reduce the total interest paid over the loan’s term. This is because you make an extra repayment each year.
• Increase Your Repayments: If your financial situation allows, consider increasing your regular repayment amount. Even small additional payments can significantly shorten your loan term and reduce interest costs.
• Offset Accounts: Utilise an offset account if available. This can reduce the interest charged on your loan by offsetting the loan balance with the money in your account.

Further to this, consider if you have enough saved in your offset account to justify the fees, and often slightly higher rate to include the offset account. As a general rule of thumb, if you have less than $10,000 saved in your offset account, then there may be better discounted options worth exploring.

3. Access Lazy Equity

Lazy equity refers to the untapped equity in your property that could be put to better use:

• Calculate Your Equity: Determine your home’s current market value and subtract your remaining mortgage balance to calculate your equity.
• Equity Loans: Consider accessing this equity through a home equity loan or line of credit. This can provide funds for renovations, investments, or other financial goals.
• Debt Consolidation: Use equity to consolidate higher-interest debts, such as credit cards or personal loans, into your home loan. This can lower your overall interest costs and simplify your repayments.

4. Consider Refinancing

Refinancing your home loan can offer multiple benefits, but it’s important to weigh the costs and advantages:

• Lower Interest Rates: Refinancing to a loan with a lower interest rate can result in significant savings.
• Better Loan Features: Look for loans with better features, such as offset accounts, flexible repayment options, or lower fees.
• Refinancing Costs: Be aware of the costs associated with refinancing, including exit fees, application fees, and valuation costs. Ensure the long-term savings outweigh these initial expenses.

5. Consult a Mortgage Broker

A mortgage broker can provide expert advice and access to a wide range of loan products:

• Personalised Advice: Brokers can assess your financial situation and recommend loans that best suit your needs.
• Access to Multiple Lenders: Brokers have access to a variety of lenders and can often secure competitive rates and terms.
• Streamlined Process: They can handle much of the paperwork and negotiation, making the refinancing process smoother and less time-consuming.

Final Thoughts

A new financial year is an opportune time to review your home loan and ensure it aligns with your financial goals. By checking interest rates, reviewing repayments, accessing lazy equity, and considering refinancing, you can optimise your home loan and potentially save thousands of dollars. Take the time to conduct a thorough review or consult a mortgage broker to explore the best options for your situation. Your future self will thank you for it!

Happy New Financial Year, and here’s to making smart financial decisions!

Ally Home Loans Pty Ltd is your ally in finance for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.

Book an obligation-free, complimentary consultation here today.

Ally Home Loans Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.