Five Reasons to Check Your Home Loan
Just like you’d schedule regular check-ups for your health, it’s equally important to review your finances—and your home loan is no exception. Whether you’ve had your loan for one year or 20, revisiting its terms can help you save money and optimise your financial situation. In this blog, we’ll explore the key reasons why checking your home loan is essential and how QE Loans can assist in securing a better deal.
We’ll cover:
- Why reducing your home loan interest rate matters
- How to maximise your money with an offset account
- Preparing for changes in your financial situation
- Using your home equity for investment opportunities
- Simplifying your finances through debt consolidation
Reason 1. To Reduce Your Home Loan Interest Rate
Reviewing your home loan interest rate can have a significant impact on your finances. A small reduction in interest can lead to huge savings over the life of your loan, potentially shortening your repayment period.
Key Questions to Ask:
- Could you be paying a lower interest rate?
- Are you paying for features you don’t use?
- Does another loan offer better benefits or flexibility?
How QE Loans Can Help:
At QE Loans, we assist homeowners in finding opportunities to refinance or negotiate a lower rate, helping you save money and potentially pay off your mortgage faster.
Here’s a table showing the difference in interest rates for a fictional $500,000 home loan at 4%, 5%, and 6%:
Interest Rate | Monthly Interest Payment | Total Interest Paid (30-year term) |
|---|---|---|
4% | $2,387.08 | $359,348.80 |
5% | $2,684.11 | $466,279.60 |
6% | $2,997.75 | $579,190.00 |
Based on the table, the difference in total interest paid over a 30-year term between a 6% interest rate and a 4% interest rate on a $500,000 home loan is:
$579,190.00 – $359,348.80 = $219,841.20
This means that over the life of the loan, you would pay $219,841.20 more in interest at 6% compared to 4%.
Note: This calculation assumes a 30-year fixed-rate mortgage with monthly payments. The total interest paid is rounded to the nearest dollar. Actual loan terms may vary.
Reason 2. To Maximise Your Money’s Potential – Home Loan Offset Account
An offset account can be a powerful tool in reducing your mortgage interest. If your financial situation has improved—such as receiving a pay raise or lump sum—you can use these funds to maximise your offset account and save on interest.
This is an example of how you might do it:
- By Boosting Your Repayments – Making additional payments on your mortgage allows you to reduce the loan principal faster, which in turn reduces the overall interest you pay.
- By Setting Up Offset Accounts for Savings – An offset account links your mortgage with your savings account, reducing the interest charged by offsetting the principal balance of your loan with your savings.
How QE Loans Can Help:
QE Loans can evaluate whether your current loan structure allows you to take full advantage of an offset account or if it’s time to switch to a more beneficial loan product.
Reason 3. To Prepare for Financial Situations to Change
Life is unpredictable, and your financial situation can shift unexpectedly. Whether you’re anticipating a job change, market fluctuations, or unexpected expenses, it’s important to ensure your home loan is adaptable. Regularly reviewing your loan structure can help prepare for these changes and safeguard your financial security.
Understanding Your Loan-to-Value Ratio (LVR)
The Loan-to-Value (LTV) ratio is a crucial metric that lenders use to assess the risk involved in underwriting your mortgage. This ratio compares the amount of the loan to the appraised value of the property. A higher LTV ratio—where the loan amount is close to or matches the property’s value—signals more risk for the lender, as there is less equity built into the property.
When your LTV ratio is high, lenders may view your loan as more likely to default, especially in times of financial uncertainty. This is because, in the event of foreclosure, it can be harder for the lender to sell the property at a price that covers the outstanding balance and yields a profit. On the other hand, a lower LTV ratio shows you have more equity in your home, which can strengthen your negotiating power if you want to refinance or borrow against your property.
How QE Loans Can Help:
At QE Loans, we can help you assess your current LTV ratio and adjust your loan structure to reduce risk, especially if you’re facing potential changes in your financial situation. By doing so, you can better position yourself to handle life’s surprises while maintaining a healthy financial outlook.
Reason 4. To Have Enough Equity for Investment Property Opportunities
If you’ve built up equity in your home, you may be in a position to leverage it for investment opportunities. Checking in on your home loan can reveal the potential to use your equity to purchase an investment property and grow your wealth.
Turn Your Equity into Investment Power:
Your home’s equity can be unlocked through refinancing, providing the necessary funds for investment in a second property.
How QE Loans Can Help:
QE Loans can guide you through the process of refinancing and help assess the risks and benefits of using your home equity to invest in property.
Reason 5. Improve & Simplify Your Finances with Debt Consolidation
Managing multiple debts can be stressful, but consolidating them under your home loan can simplify your finances and reduce the interest you pay on high-interest debts.
Consolidate for Peace of Mind
Consolidating your debts into your home loan allows you to benefit from a lower interest rate and manage one monthly payment, reducing financial stress.
Be Aware of the Trade-Offs
While debt consolidation offers convenience, it can extend the life of your loan. Understanding the long-term effects is crucial before moving forward.
How QE Loans Can Help:
QE Loans will assess your current financial situation and guide you through the debt consolidation process, ensuring it’s the right decision for you.
FAQ Section:
- How often should I review my home loan?
- It’s recommended to review your home loan every 12-24 months or when there are significant changes in interest rates or your financial situation.
- How much could I save by refinancing?
- Even a small interest rate reduction of 0.5% could save you thousands over the life of your loan, depending on the loan amount and terms.
- What’s the benefit of an offset account?
- An offset account helps reduce the interest on your loan by using your savings to offset the principal balance, which can lead to significant interest savings.
- Can I refinance if my financial situation has changed?
- Yes, it’s possible to refinance, but it’s important to review your new situation with a mortgage broker to ensure you qualify for a suitable loan.
- Is debt consolidation right for me?
- Debt consolidation can reduce your monthly payments and lower your interest rate, but it’s essential to consider how it may extend the life of your loan.
Conclusion
Regularly reviewing your home loan is essential for ensuring that you’re getting the best deal and making the most of your financial situation. With expert guidance from QE Loans, homeowners can optimise their loans, refinance if necessary, and make informed financial decisions for the future.
Contact Us Today
Ready for a home loan check-up? Contact QE Loans today for a free assessment and discover how you could save on your mortgage. Let’s find out how we can help you save!
