Taking out a property loan is a massive financial milestone, often the largest debt a person will ever have. It’s easy to breathe a sigh of relief after the papers are signed and the keys are in hand, thinking the hard part is over. But a property loan isn’t a “set and forget” financial product. The financial landscape is constantly shifting, with interest rates fluctuating and new loan products entering the market. Neglecting your mortgage can be a costly mistake, leading to thousands of dollars in unnecessary interest payments and missed opportunities for significant savings.
Managing your property loan effectively is just as crucial as securing it in the first time. It involves more than just making your monthly repayments. It’s about regularly reviewing your loan’s terms, monitoring your interest rate, and understanding how market changes affect your financial situation. Are you on the best possible rate? Could you be paying off your loan faster? Is your current loan structure still aligned with your financial goals?
This guide will walk you through the essential steps to ensure your property loan is properly taken care of. We’ll explore how to conduct a regular health check on your mortgage, identify signs that it might be time for a change, and understand the options available to you, from refinancing to negotiating with your current lender. By the end of this post, you’ll have the knowledge and confidence to take control of your mortgage and make it work for you, not against you.
The Importance of a Regular Loan Review
Think of your property loan like a car. When you first buy it, it runs perfectly. But over time, it needs regular maintenance—oil changes, tire rotations, and tune-ups—to keep it running efficiently. If you neglect it, its performance suffers, and you might face costly repairs down the road. Your mortgage is no different. A loan that was competitive when you first got it can become outdated and expensive as market conditions and your personal circumstances change.
A regular loan review, or a “mortgage health check,” is the process of evaluating your current home loan to ensure it still meets your needs and remains competitive. Financial experts generally recommend conducting a review at least once a year or whenever a significant life event occurs, such as a change in income, having a child, or a major shift in interest rates.
The primary goal is simple: to save money. Even a small reduction in your interest rate can translate into substantial savings over the life of the loan. For example, on a $500,000 loan, a 0.5% interest rate reduction could save you over $50,000 in interest payments over a 30-year term. Beyond interest savings, a review can help you pay off your loan faster, access equity for investments, or consolidate other debts into a more manageable single payment.
Key Signs Your Loan Needs Attention
How do you know if your property loan is no longer serving you well? There are several clear indicators that it might be time to take a closer look. Ignoring these signs is like ignoring the check-engine light on your car’s dashboard.
Your Interest Rate is No Longer Competitive
One of the most obvious signs is an uncompetitive interest rate. Lenders often reserve their best rates for new customers, a practice known as the “loyalty tax.” Existing customers may find their rate has slowly crept up over time, or that new offers on the market are significantly better.
To check if your rate is competitive, you can:
- Compare with new customer rates: Visit your lender’s website and see what interest rate they are offering to new borrowers for a similar loan product. If it’s lower than yours, you’re likely paying a loyalty tax.
- Use online comparison tools: Websites like Canstar, RateCity, or Finder allow you to compare hundreds of loan products from various lenders in minutes. This gives you a clear picture of where your loan stands in the current market.
You’re on a Fixed Rate Nearing its Expiry
If you have a fixed-rate loan, it’s crucial to be proactive as the fixed period comes to an end. When the term expires, your loan will typically revert to the lender’s standard variable rate, which is often much higher than competitive market rates. Lenders count on borrowers’ inaction in this situation. Start researching your options at least three to four months before your fixed rate expires. This gives you ample time to either negotiate a new fixed or variable rate with your current lender or refinance to a better deal elsewhere.
Your Financial Situation Has Changed
Life events can significantly alter your financial landscape. If your income has increased, you might be in a position to make extra repayments and pay off your loan faster. Conversely, if your income has decreased or your expenses have gone up (for example, with the arrival of a new child), you may need a more flexible loan with features like an offset account or redraw facility to manage your cash flow. A loan that was perfect for a dual-income couple might not be suitable for a single-income family.
You Want to Access Your Home’s Equity
As you pay down your mortgage and your property value increases, you build equity. This equity is a valuable asset that can be used for various purposes, such as renovating your home, investing in another property, or funding a major purchase. If your current loan doesn’t allow you to easily access this equity, or if the costs to do so are high, it may be time to consider a loan product that offers more flexibility.
How to Conduct a Mortgage Health Check
Now that you know what to look for, let’s break down the process of conducting a thorough mortgage health check into actionable steps.
Step 1: Gather Your Loan Documents
Before you can assess your loan, you need all the relevant information at your fingertips. Find your original loan agreement and your most recent mortgage statements. The key details you’ll need are:
- Loan type: Is it a variable rate, fixed rate, or split loan?
- Current interest rate: This is the most critical piece of information.
- Remaining loan balance: How much do you still owe?
- Remaining loan term: How many years are left on your loan?
- Loan features: Do you have an offset account, redraw facility, or a package with a credit card?
- Fees: Note any annual fees or other charges associated with your loan.
Step 2: Research the Market
With your loan details in hand, it’s time to see what else is out there. Use online comparison websites to research current interest rates for loans similar to yours. When comparing, look at both the interest rate and the comparison rate. The comparison rate includes most of the upfront and ongoing fees, giving you a more accurate picture of the true cost of the loan.
Pay close attention to loans that offer features you might need, such as an offset account. While these loans sometimes have slightly higher rates or fees, the interest savings from using the offset account effectively can often outweigh the costs.
Step 3: Use a Refinancing Calculator
Online refinancing calculators are powerful tools that can help you quantify the potential savings. By inputting your current loan details and the details of a new loan you’re considering, the calculator can estimate:
- Your new monthly repayment amount.
- Your total interest savings over the life of the loan.
- How long it will take for the savings to offset the costs of refinancing (the “break-even point”).
This step is crucial for making an informed decision. Seeing the potential savings in black and white can be a powerful motivator to take action.
Step 4: Contact Your Current Lender
Armed with your research, your first call should be to your existing lender. Don’t be afraid to negotiate. Inform them that you’ve seen more competitive offers on the market and ask if they can match them. Mention the specific rates you’ve found from other lenders.
Often, lenders will be willing to offer a rate reduction to retain a reliable customer. It’s far cheaper for them to keep you than to acquire a new customer. Even a small discount can save you a significant amount of money and is much less hassle than refinancing.
Step 5: Consider Refinancing
If your current lender is unwilling to offer a competitive rate, it’s time to seriously consider refinancing. This involves applying for a new loan with a different lender to pay off your existing mortgage. While the process can seem daunting, the long-term savings often make it worthwhile.
Be sure to account for the costs of refinancing, which can include:
- Discharge fees: Charged by your old lender.
- Application fees: For the new loan.
- Valuation fees: To assess the value of your property.
- Government charges: Such as mortgage registration fees.
A good mortgage broker can be invaluable during this process. They can compare hundreds of loan products for you, handle the paperwork, and guide you through each step.
Take Control of Your Biggest Asset
Your property loan is likely the most significant financial commitment you’ll ever make. Treating it as a “set and forget” product is a missed opportunity at best and a costly financial drain at worst. By taking an active role in managing your mortgage, you empower yourself to save money, build wealth, and achieve your financial goals faster.
Conducting a regular health check on your property loan should be a standard part of your financial routine. Stay informed about the market, understand your loan’s features, and don’t hesitate to negotiate or switch lenders if a better deal is available. A few hours of research and a couple of phone calls each year could save you tens of thousands of dollars and shave years off your mortgage.
If you’re unsure where to start or feel overwhelmed by the options, seeking advice from a qualified mortgage broker or financial advisor can provide clarity and direction. They can offer personalized recommendations based on your unique circumstances and help you navigate the complexities of the lending market. Your future self will thank you for it.
