It's time: to do a home loan health-check

Have you done a health-check on your home loan recently? It might be a good idea. The current COVID-19 climate has produced record low interest rates — an opportunity for mortgage owners and investors to review their home loans and figure out: is this still working for me and my current situation? You could save some hard earned coin and possibly earn some money in the process. Think about it: we change our hair, clothes and diet, why do we deal with our finances differently?

We called on experts Associate Professor of Finance at Curtin University Shams Pathan and Senior Lecturer in Banking and Finance Dr Mamiza Haq for some professional advice.

“Yes, it is always worth shopping around in relation to interest rates and better deals,” they said.

But not without doing your homework.

IF YOU’RE THINKING ABOUT SWITCHING BANKS?

If you’re thinking about breaking-up with your bank, it’s important for home owners to understand the strengths and weaknesses involved.

Fees

Understand if there are any other fees involved when making the switch.

Are there any fees associated with switching to a new bank? Establishment fees? Ongoing annual or monthly fees?

“Borrowers need to evaluate the fees charged by the banks for early retirement or for refinancing with another bank,” Panthan and Haq said.

Benefits

It’s always good to ask banks if there are any other benefits if they refinance.

Such as: better restructuring of the loan, customised loan to suit your needs, fee waivers, points discounts and cashback offers.

Don’t be afraid to ask your bank all the questions you need to.

“With your homework, if you see NET benefit in switching home loans, the borrowers shouldn’t hesitate to do so,” Panthan and Haq said.

OTHER ASPECTS TO KEEP IN MIND:

Although interest rates are low, property prices are showing an increasing trend, particularly over the last quarter of 2020 — so there are a few things to be aware of:

It’s important for borrowers to understand how much they can afford to borrow due to the impact of compounding interest rate.

Make sure to understand what both interest-only loans and traditional loans are.

BE A RESPONSIBLE CONSUMER

It is important to understand finances in today’s world where there are so many options to make and save money. If you’re a home owner, you will want to minimize your costs, and you’ll probably want to save money for later in life. So, it’s important to ask your bank questions.

“Do not shy away from asking questions that you have in mind,” Panthan and Haq said.

In relation to any hidden costs, it pays to do some of your own handy work. Try give your home loan a once over every few months to make sure it’s in the best possible shape.

“Check your portfolio every two-three months and be in constant vigilance that banks are deducting the amount that they are supposed to,” they said.

At the end of the day they should be mindful that IT IS YOUR MONEY.

“Clients are the King,” Pathan and Haq said.

Itching to switch? If you’ve done your homework, what are you waiting for? P&N Bank are currently giving away $3,000 cashback —for a limited time— to home loan customers switching to P&N Bank. The cashback offer applies to variable AND fixed rate loans. Visit the website—Pnbank.com.au/cashback—for more information.