If you have a home or investment loan, you may have come across advice suggesting reviewing it every one to two years. Nevertheless, it is crucial to remember that one to two years represents the maximum interval you should wait before conducting a loan review and in numerous instances, reviewing your loan even sooner than this recommended timeframe is highly beneficial.
Why Should You Review Your Home Loan?
There are several compelling reasons why reviewing your home loan is beneficial:
Save money and pay back your mortgage sooner. By reviewing your home loan, you can assess if you’re paying too much and potentially secure a better deal.
This can lead to significant savings in interest and charges, allowing you to shorten the life of your loan. Moreover, you may be able to reduce your repayments, freeing up more disposable income each month to make additional repayments or alleviate financial pressures.
Adjust Repayment Frequency
Reviewing your home loan presents an opportunity to align your repayment cycle with your paycheck. If you are paid fortnightly or weekly but currently make monthly mortgage repayments, adjusting the frequency can help you budget more effectively and keep better track of your cash flow.
Take Advantage of New Home Loan Features
Reviewing your mortgage may reveal new features that weren’t available when you initially took out the loan. These features, such as offset accounts, redraw facilities, or flexible repayment options, can significantly improve your ability to manage your mortgage effectively and work towards paying it off sooner.
Consolidate Debts
Refinancing your home loan allows you to consolidate your debts into a single loan, including credit cards and personal loans. This consolidation simplifies your repayments, reduces the number of accounts to maintain, and enhances your budgeting capabilities.
Access Available Equity
If the value of your home has increased since your purchase, reviewing your home loan allows you to access the equity you’ve built up. This extra cash can be used for various purposes, such as buying a new car, renovating your home, or taking a vacation.
Capitalize on Market Trends
When interest rates are low, reviewing your home loan allows you to lock in a competitive fixed-term rate, taking advantage of favourable market conditions. This provides peace of mind, knowing that your repayments will remain unchanged for the agreed-upon period of your loan.
When Is It Time to Review Your Home Loan?
Interest rates are just one aspect to consider when selecting a home loan. The reality is that circumstances can change, especially considering the long duration of most mortgages, which typically span 30 years.
That’s why it is crucial to regularly review your home loan, especially when your circumstances undergo significant changes. This ensures that your loan continues to be well-suited to your evolving needs. While everyone’s situation is unique, here are some everyday situations that warrant a review:
Incurring Additional Debt
If you’ve taken on other debts, such as credit card debt or personal loans, it’s an excellent time to review your home loan to explore options for consolidating or managing these debts effectively.
Receiving a Large Sum of Money
If you’ve received a substantial sum, such as an inheritance or a bonus, reviewing your home loan can help you determine the best approach for utilizing these funds, whether paying off a portion of your mortgage or exploring investment opportunities.
Needing Additional Funds
If you require extra funds for home renovations, purchasing another property, or any other significant expense, reviewing your home loan can help you assess whether refinancing or accessing equity is viable.
Considering Property Sale or Change in Property Use
If you plan to sell your property to upsize, downsize, or change its usage, reviewing your home loan can help you evaluate the best strategy for your new circumstances.
Needing Features Your Current Loan Doesn’t Offer
If your current loan or lender doesn’t provide the features, you now require, such as an offset account or flexible repayment options, reviewing your home loan to find a product that better aligns with your needs is essential.
Change in Financial Situation
Significant changes in your financial situation, such as starting a new job, experiencing a loss of income, or other significant shifts in income or expenses, warrant a review of your home loan to ensure it remains manageable and appropriate.
Regularly reviewing your home loan allows you to adapt to changing circumstances, take advantage of new opportunities, and ensure that your mortgage continues to serve your best interests throughout its duration.
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