When was the last time you actually looked at your home loan? And I am not just talking about checking your repayment amount, or noticing that your interest rate changed. I am talking about actually reviewing the loan and asking whether it is still the right structure for your circumstances and your goals.
For many homeowners, the answer is probably “not recently”.
Once a mortgage is in place, it can become part of the background noise of everyday life. The repayment comes out of the account each month and the loan gradually reduces.
But your circumstances can change significantly over the 20 or 30 years you have a mortgage. Your income may increase. Your savings may grow. Your family circumstances may change. Interest rates move. Your financial goals evolve.
Your home loan should be reviewed alongside those changes.
Your original mortgage may no longer suit your current situation
Imagine you bought your home seven years ago. At the time, you were focused on getting finance approved, buying the property and keeping the repayments manageable.
Fast forward seven years.
Your income has increased. You have built up savings. Perhaps you have started a family, changed jobs or are thinking about investing.
But your home loan is still structured exactly as it was when you bought the property.
That doesn’t necessarily mean it is wrong. But it does mean it is worth asking whether it is still the most appropriate structure for your current circumstances.
A mortgage review is about more than finding a lower rate
When people think about reviewing their home loan, they often think about one thing:
Can I get a lower interest rate?
That is certainly worth considering. But a proper review can go further. You could look at:
- Your current interest rate
- Your remaining loan term
- Your repayment frequency
- Your offset account
- Your loan structure
- Your current income and cash flow
- Your future financial goals
- Whether refinancing could be beneficial
- Whether your existing lender can offer a more competitive deal
The cheapest rate isn’t always the best solution. The goal is to understand whether your overall loan structure is supporting what you are trying to achieve.
A real-life example: the loan that was left on autopilot
Consider a homeowner who took out a $500,000 mortgage 10 years ago. At the time, their circumstances were straightforward. They had a stable income, no investment plans and wanted a simple home loan.
Ten years later, their situation looks very different.
Their income has increased. They have accumulated savings and are considering purchasing an investment property in the future. Their home loan, however, has never been reviewed.
A conversation with a broker could help them understand whether their current structure still makes sense and whether there are opportunities to improve the way their debt is managed. It may turn out that no major change is necessary.
But without the review, they would never know.
Your offset could be doing more
One area worth reviewing is your offset account. If you have an offset but keep most of your savings in a separate account, you may not be making the most of the feature. For example, a household might have $25,000 sitting in savings while also carrying a substantial home loan.
Depending on their loan structure and circumstances, moving eligible savings into an offset could potentially reduce the balance on which interest is calculated while keeping the money accessible.
Again, this isn’t about assuming an offset is right for everyone.
It is about understanding how your existing features work and whether you are using them effectively.
What happens when your circumstances change?
Your mortgage was designed around a particular point in your life. But life doesn’t stand still. You may have:
Increased your income: Could you now afford to increase your repayments?
Built up savings: Could an offset account help your cash work harder?
Received a bonus: Could part of it be used to reduce your debt?
Seen your interest rate change: Is your current rate still competitive?
Changed your long-term goals: Does your current loan structure support where you want to go next?
These are the questions that make a mortgage review worthwhile.
Don’t wait until you have a problem
A home loan review isn’t only something to consider when interest rates rise or you are struggling with repayments. In fact, reviewing your mortgage when things are going well can be just as valuable.
If your income is stable and your financial position has improved, you may have more options available to you. You could potentially increase repayments, restructure your loan, refinance, make better use of an offset or simply establish a clearer path towards paying off your mortgage sooner.
As we discussed in our blog on ways to reduce your home loan faster, there are a number of strategies you can consider. The challenge is knowing which ones are relevant to you.
How often should you review your home loan?
There is no single rule that applies to everyone, but reviewing your mortgage at least annually can be a useful habit.
It is also worth considering a review when something significant changes, such as:
- You receive a pay rise
- Interest rates change
- You receive a large bonus or windfall
- Your savings increase
- You have a change in family circumstances
- You are considering buying an investment property
- You are approaching the end of your fixed-rate period
- Your financial goals change
Think of it like a financial health check. You don’t wait until something is seriously wrong before checking your health. Your mortgage deserves the same attention.
A faster path to mortgage freedom starts with knowing where you stand
The goal of a mortgage review isn’t necessarily to change your loan. Sometimes the best outcome is confirming that your current setup is working well.
But sometimes a review can uncover an opportunity you hadn’t considered.
And when you are talking about a loan that may run for 20 or 30 years, even relatively small improvements can potentially make a meaningful difference over time.
Ready to take a closer look?
Our Debt Reduction Playbook is designed to help you understand some of the strategies you could consider to reduce your home loan sooner while still enjoying what matters most.
Download the Debt Reduction Playbook to start exploring your options.
And if you would like to understand whether your current home loan is working as hard as it could, talk to the Ironbark Group team about a Financial Health Check.
With access to more than 50 lenders and more than 200 years of combined experience across our team, we can look beyond your current interest rate and consider how your lending structure fits with your broader financial goals.
Get in touch with Ironbark Group Australia today.