Nothing is certain in the world of finance, but there are definitely ways we can protect ourselves and plan for the future. If you’re in the market for a mortgage, we have some handy hints for making sure your arrangement is as stable and beneficial as possible.
1. Assess your current bank and home loan
Even if you are not considering changing your home loan, it makes sense to do an annual ‘health check’ on your mortgage to make sure you’re on the right track. It may not seem like much, but small fees and differences to rates in mortgage loans can add up over time.
Here are some questions you can ask yourself to future proof your loan:
• What products are available on the market right now? Are there any that suit my needs better?
• How much am I paying each month for my home loan? Is it possible to get a better rate?
• Is a fixed or variable rate best?
• Is my home loan flexible? Can I make extra repayments at no additional cost?
• How much would it cost if I wanted to redraw?
• Am I satisfied with the level of service I am receiving from my bank?
Compare your current home loan to see if it’s competitive with other products on the market. If you find that there are areas that you can save on, refinancing might be a cost-effective way to put you ahead financially.
2. Refinance your home loan to suit your needs
You may have just had a little one, or perhaps you are planning a major holiday overseas. Financial needs change over time, and it pays to make sure your home loan can meet them.
• Get a better rate
The most common reason for home owners to refinance is to secure a lower interest rate. Not only can it cut down on monthly repayments, but over time it can save you thousands of dollars that you can be spending on something else.
• Additional Home Loan Features
The adage ‘more is better’ only applies in some cases when it comes to home loans. If you’re not taking advantage of a lot of the features that your home loan offers, it may be cheaper to choose to refinance to a more basic loan.
That’s not to say that more isn’t better. If you feel that your loan isn’t offering you all that you need, you may benefit from refinancing to a loan with more features. For example, BOQ’s Clear Path offers variable home loans with no application fees, 100% mortgage offset, allows free redraws, and provides flexible repayment options.
3. Simple management techniques
There are ways you can better manage your mortgage to pay it off sooner.
• Repayment Schedule
Paying fortnightly might mean you can shave time off repaying your home loan principal and save on interest, but it may also add to your financial burden. Compare fortnightly repayments with monthly ones and see which one is more beneficial to your situation.
• Extra and Lump Sum Repayments
Sometimes we have a little extra cash in our pocket, and having the option to make extra repayments with no added cost can help you pay off your mortgage faster.
• Direct Loan Repayments
Late payments can incur fees and costs. Avoid these by setting up direct payments with your bank account to ensure you make your minimum repayment by the due date each time.
4. Guard against unexpected financial shortfalls
Sometimes life throws curveballs at us. There are ways you can help to protect yourself against these unexpected financial shortfalls.
• Repayment Holiday
If you need to free up some funds for a short period, a repayment holiday can give you a small break from your loan repayments.
• Redraw Facility
Excess payments made to your home loan is often accessible to you if you need to fund things like home renovations or other large purchases.
5. Prepare for the known and the unknown
Future proofing your mortgage loan means looking ahead. Have a think about what you may need in the close and distant future. For example, are you thinking of renovating in the next five years?
Write them down in a list which will help you visualise any potential problems you may encounter. While we can’t predict all the changes in certain terms, choosing the right mortgage now may mean saving on potential costs of refinancing later.
If you’re ready to make the switch, contact a local bank such as BOQ for expert help on refinancing options.