You might have taken out a home loan a while ago, but do you know the current interest rate that you are paying for it? Your interest rate is where you can draw the line on whether your home loan is affordable or maybe it is time to reconsider and look for something that won’t throw you into debt. Keeping your eye out for your home loan interest rate might seem like a tedious thing, but it can be your saving grace in saving thousands of dollars.
40% of Australians are not aware of their current interest rate
A survey by Savvy revealed that 40% of Australians do not know what’s cooking when it comes to their home loan interest rate, which is an alarming figure. If you are not careful on the rising interest rate on your home loan it can wreak havoc on your finances in the long run. It can also cause you to miss out on better offers that are currently on the market that will be an upgrade. So, instead of setting and forgetting your home loan what can you do to get a loan that is up to date and affordable?
Refinancing your home loan can be an option
Most Australians consider refinancing an unnecessary hassle because of the belief that they won’t find a home loan that has an interest rate that makes much of a difference. However, 74% did not know how much they can save on refinancing. You could do more harm than good to your finances by staying loyal to a loan that is hard to keep up with.
Finding your interest rate sweet spot
The adage of ‘The grass is greener on the other side’ is applicable when looking for a new interest rate. You can search for home loans that are affordable both online and through traditional channels such as a mortgage broker who will help you source the best rate for your wallet. Give yourself ample time instead of going with the first low rate you come across. This will be rewarding when you have searched deep enough to find a competitive rate that you can’t find anywhere else.
Are your home loan settings still suitable?
The type of home loan you go for also plays a part in what you will end up paying for. Do you go for a fixed rate or a variable rate? Both have their own pro’s and con’s, but it will all be settled on the type of borrower you are. The variable rate means that your lender will adjust your home loan based on the RBA cash rate.
The downside to this is that your interest rate could change according to your lender’s discretion and it can be bigger or smaller to the set RBA cash rate. However, the drawcard is that if the cash rate is kept at a low your payments drop, and it offers more flexibility. Fixed rates, on the other hand, will suit people who like to stick to a budget and know that they will be paying a fixed amount every month. The downside to this is that you could miss out on saving when the cash rate drops because your loan is set at a fixed rate.
The best way to know that you are walking away with a home loan that matches your financial needs is to thoroughly look at its features. Compare where it is needed so you can have peace of mind. You can also speak to a financial advisor who will help you choose something that is more suited towards your finances.