The Reserve Bank of Australia has again kept the cash rate on hold at two per cent, with mortgage interest rates on both variable and fixed rate loans generally below the four per cent mark. However, there is still no room for complacency from home loan borrowers as they may be costing themselves more money with the following home loan mistakes:
- Paying a higher interest rate. According to the database of financial comparison website Canstar, there is a 2.26 per cent difference between the lowest and highest standard variable interest rate on home loans. This could easily translate to more savings per month if the borrower can reduce his home loan interest rate to the current average. Although switching banks might work, a simple call to the lender telling them about other banks' interest rates can make them lower their rates for the borrower.
- Making monthly payments. Simply adjusting the payment frequency to every week or every two weeks can help borrowers make an extra payment each year. If a borrower has a $300,000 30-year loan, paying fortnightly instead of monthly will help him pay off his loan 4.5 years earlier, hence saving more than $20,000 in interest costs.
- Not reviewing one's home loan. It is important for borrowers to review their home loans at least every year just to check up on the fees and charges they are paying. Mortgage brokers can evaluate whether or not the loan is still competitive. Otherwise, borrowers might end up paying too much for their mortgages.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan