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We all take little steps to make sure we’re fighting fit heading into winter, but when was the last time you checked up on the health of your home loan?

As a general rule of thumb you should give your home loan the once over every 12 months to make sure it’s in the best possible shape. So that your home loan gets a clean bill of health this winter, here’s a step by step guide to help you identify possible problem areas with your home loan and your options on how to fix them.

Step 1. Review your home loan statements

Do you know what the interest rate is on your current home loan, what fees you pay and what your monthly repayments are? Reviewing your mortgage and bank statements will give you vital information about your overall financial position and the impact your existing home loan interest rate or fees could be having on your bottom line.

With your statement in hand, it’s also definitely worth doing some quick number crunching with the help of a home loan repayments calculator to make sure that you’re being charged the correct amount, especially given that a number of big-time lenders have recently been forced to refund mortgage customers for overpriced repayments.

Step 2. Compare your options

Once you’ve got a good idea of what your home loan costs you and the interest rate you are being charged, you need to compare it against other loans to work out whether it’s in a healthy range. How? By checking out the competition of course.

During this stage of your home loan health check, you will be comparing your home loan to other similar loans available and also looking for new options that might better meet your needs. You’ve got a range of options to consider from variable rate loans, fixed rate loans and even split loan options. You’ll notice that all lenders will include a comparison rate in their advertising. This rate is really important because it shows you the real cost of the loan including the headline interest rate for that loan but also the ongoing fees as well.

Step 3. Bells and whistles or no-frills?

Aside from the type of interest rate, there are whole host of other home loan features worth reviewing or considering.

Do you want an offset account that will help you save on interest? Is it likely that you’ll make extra repayments? And if you do, do you want the luxury of a redraw facility for when you need access to extra cash?

The catch with all of these added home loan features is that they usually come at a price, whether that is a higher interest rate or ongoing fees. Just like health insurance, you don’t want to pay for unnecessary extras that you’ll never use.

Step 4. Prepare to refinance

If in doing your due diligence you discover that there are better deals out there than the one you’ve got or there’s a home loan more suited to your current financial circumstances, it’s time to consider refinancing. By switching to a cheaper loan you’ll have two options, you can keep your repayments at the same amount which will mean you’ll pay off your home loan faster or you could switch to lower your repayments so that you have more disposable income each month.

If you do opt to refinance, it’s important to recognise that there will be some upfront costs like a discharge fee on your old loan and establishment or application fees on your new one. The good news is that in most cases, you’ll be able to recoup these initial expenses within the first year of your new home loan and the benefits of refinancing will last you for years to come.

Picture of Steve Jovcevski who is Mozo’s property expert.

Author bio: 

Steve Jovcevski is Mozo’s property expert. With an extensive knowledge of home loan products and property trends, Steve is full of practical tips to help first homebuyers, refinancers or investors build and get the most out of their property portfolio.

Important information

Information on this website is general and has been prepared without taking into account your objectives, financial situation or needs. You should consider whether this information is suitable for your objectives, financial situation and needs before acting on the information provided.