Changing your home loan for a better deal

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

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If you have been back and forth about changing your home loan, there are a range of aspects you should consider. This article encompasses a few basic guidelines that will come in handy before making a decision.

Decide what you expect from your home loan

There is a broad range of home loans created for meeting various lifestyles and financial backgrounds. The moment you establish what you expect of your next loan, it will help you narrow down your alternatives. Thus, determine whether you wish to opt for a variable over a fixed rate, combination rate loans, interest repayments, interest in advance or interest only.

For instance, variable home loans are, at the moment, amongst the most popular choices for Australians. That would be because they provide one with flexibility and a range of attractive features such as the option of linking the loan to an offset account, or the redraw facility. At the same time, this type of loan is generally more flexible, as it allows one to make additional repayments or overpayments.

These features are genuinely convenient and may aid you to save a considerable amount of money that would normally go on interest. However, that means your budget should be flexible, namely if the situation asks for it, you should be able to handle possible growths in the interest rate. Thus, use an online mortgage calculator and determine what type of loan fits your financial situation best.

Also, before you opt for the lowest interest rate available on the market, remember to factor in the entire package costs during the life span of the loan. For instance, factor in ongoing and administration fees, variation costs, possible late payment fees, lender’s insurance requirements, plus early repayment or break fees. Believe it or not, as these expenses add up, it can cost you up thousands of dollars.

Establish the costs of switching

Before taking the plunge and switching lenders, make sure to take into account the actual cost this decision involves, as it follows:

  • Mortgage discharge fees
  • Property valuation fees
  • Break costs – for fixed-rate loans
  • LMI costs
  • New loan application fees

Ever since July 2011, exit fees have been removed. In spite of that, you might still be required to pay a break fee in case of switching lenders. Typically, this fee depends on the remaining amount of money you are due to make payments for. Plus, a new loan application involves paying the application fees. However, this may rely on the lender. Consequently, it’s always best to ask.

Carefully research your options

Always, always examine your home loan refinance options thoroughly before you decide on an alternative. It's recommendable that you communicate directly with different banks and determine what they’re willing to offer you. Afterward, make sure that you compare rates, service and bank offers.

The bottom line is that, irrespective of the reason why you wish to change your loan, you should consult with a financial specialist before making a decision. Every individual’s situation is unique. Thus, the opinion of a professional can be, indeed, of great help.

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