What is a Health Check?
Just as we as humans require a visit to the doctor every now and then to maintain good health and balance, your home loan can also benefit from a "check up". With the ever-changing economy, what is best for your home loan right now may be completely different to before. Thus, good practice is to review the status and health of your loan at least once a year.
What to look at?
So you haven’t looked at your home loan since Myspace was popular , nSync* were hot and crocs were all the rage. Don’t worry - you aren’t alone. Surveys suggest only 1 in 4 people have reviewed their home loan in the last 10-15 years. So this begs the question - what exactly do you need to look at when doing a mortgage health check?
- Interest Rates: Do you know where your interest rate is in comparison to other lenders? This is the most important one to review, and the one that can potentially save you the most money. As seen all over the media, banks and property are taking a hit at the moment, so to try attract business, the banks have dropped their rates. Many lenders, for example, are now sitting in the low 3% for basic home loans.
- Fees and Charges: All banks love fees - you won't find a lender that won't sneak a fee in anywhere they think they can get away with it. However, there are quite a few fees that can be avoidable. When you initially signed up, you may have added a package that you had assumed you would use, and are still paying an annual fee for that package 10 years down the track. You may be able to get rid of it! While fees and charges are a given, don’t assume that there isn’t a way to reduce these over the lifetime of your home loan. You would be surprised at how your fees and charges can add up over the life of your loan.
- Your Situation: Last thing to look at with your home loan's health check is your own financial situation. After all, if you are the 1 in 4 mentioned above, I’m pretty sure something would have changed in those 10 years - whether it be employment, relationship status or property value. These can all make difference to your home loan. When you first went for your loan, you might have been limited with your choices, but now you could have the banks at your feet and thus the best deals possible.
How to do it?
So, you've had a look over things and are pretty sure you are not on the best wicket you could be. What now? Well you have two ways to go:
- Your Bank: One of the first steps would be to look at your bank's current rates and products. All lenders want you to stay on their books, so if you can see that a saving can be made by switching products, your bank will generally be more than happy to help with this. You can also be cheeky and even try for a "better than advertised" rate. What many lenders fail to tell you though is that they will consider pricing requests. This is where, with the help of rates from other lenders, the bank will look at bettering your rate to be in line, or at least closer, to what is out there.
- A Mortgage Broker: I know, I've said it numerous times. I know, I am biased, but a mortgage broker and a health check go hand in hand, like a gentle and friendly nurse. A good broker will do the research and let you know what is the best deal that they can get you. They have, at their hands, hundreds of lenders - all of whom want your business. In some cases, they may send you back to your lender or bank if they think they are offering the best option, but if they can find better, they may suggest refinancing. A good broker has your best interests at heart and want to save you money.
And that is what a health check is, so why do one?
The easy answer is savings, and big ones at that. Take Eversharp Financial Services' lovely owner Sharlene - she recently did a refinance and debt consolidation that saved her clients hundreds per month in repayments.
Walking away from a health check with money in your pocket - it's likely a better conclusion than an actual doctor's appointment!