A home loan in Geelong is generally arranged around your circumstances at a particular point in time. Your income, expenses, debts, household and property goals all help shape the loan you take out. But five, ten or fifteen years later, those circumstances can look very different.
Your loan may still be working as intended, but it is worth asking whether it still suits the way you live today.
Your home loan reflects a moment in time
Think back to when you arranged your current home loan. Perhaps you were buying your first property, raising young children or establishing your career. Your household income and expenses may have been completely different.
Since then, you may have changed jobs, increased your income, renovated, taken on other debts or watched your children grow up and leave home. The supplied Finance Matters article describes the gap that can develop between your original loan and your current circumstances as “home loan drift”. It is not a technical finance term, but a simple way of describing what happens when life changes while your finance largely stays the same.
Recognising that gap does not mean there is something wrong with your loan. It simply gives you a reason to check whether the arrangement still makes sense for your current position and future plans.
What should you look at when reviewing a home loan in Geelong?
You do not need to wait until repayments become difficult or a major financial decision is approaching to look at your home loan. Start with the basics by checking your current interest rate, outstanding balance, repayments and remaining loan term. Then consider the features attached to the loan and whether you are actually using them.
From there, look at what has changed in your household. Has your income shifted significantly? Are your expenses higher or lower? Have you taken on credit cards, personal loans or other debts? Has the number of people relying on your household income changed? You may also be planning to renovate, move, invest or downsize, which could affect what you need from your loan in the years ahead.
These questions put the focus on your circumstances rather than assuming that a different product or advertised interest rate is automatically better.
Look beyond the interest rate
Interest rates are important, but they are only one part of the overall cost and suitability of a home loan. ASIC’s Moneysmart guidance on choosing a home loan recommends comparing interest rates alongside fees, repayments and loan features. It also notes that even relatively small differences in cost can add up over a long loan term.
Features such as an offset account, redraw facility or the ability to make extra repayments may be useful when they suit the way you manage your money, but some features can come with extra costs or conditions. Moneysmart also recommends checking whether loan features still suit your needs as part of a regular review.
That means a useful home loan review should consider the complete arrangement, not just one number. The question is whether the rate, fees, repayments and features continue to work together in a way that suits your household.
Reviewing your loan does not mean you have to refinance
One misconception worth clearing up is that a home loan review automatically leads to refinancing. It does not. The purpose of a review is to understand what you currently have and whether it continues to suit your needs.
In some cases, homeowners may find reasons to investigate other options. In others, they may find that their existing arrangement remains appropriate. Changing loans can also involve costs, lending criteria and longer-term financial implications, so it makes sense to understand the full picture before making a decision.
A mortgage broker in Geelong can help you examine your current loan in the context of your financial circumstances and goals. ASIC’s Moneysmart also recommends thinking about which loan features matter most before meeting with a broker and asking them to explain the cost and suitability of the options they present. Moneysmart provides further guidance on using a mortgage broker.
When was the last time you looked closely at your loan?
Home loans can run for decades, which makes it easy for them to become something you simply pay each month without giving much thought to the original structure. If several years have passed since you looked closely at yours, it may be useful to compare your position today with the circumstances that existed when you first borrowed.
Consider what has changed, what you are working towards next and whether your existing loan still fits those plans. A review does not have to result in an immediate change. Sometimes the most useful outcome is simply having a clearer understanding of your loan and whether it still does what you need it to do.
Make sure your home loan still fits your plans
Your home loan does not need to be causing a problem to deserve a closer look. As your circumstances and priorities change, an occasional review can help you understand whether the finance behind your home still suits where you are today and where you want to go next.
If it has been a while since you reviewed your home loan, contact Konnect Financial Services to discuss your current position and what you may need from your loan in the years ahead.
