Tips to get the best out of your biggest debt

Many Australians spend more time on budgeting for their next holiday, or analysing the health of their internet plan than giving their biggest debt a regular check up.

But with the current sluggish property market, and the lowest uptake of new home loans in recent years, there is no time like the present for borrowers to perform a home loan health check.

Whether owner-occupiers or investors, borrowers can take advantage of mortgage products dished up by lenders.

Coupled with reduced interest rates, consumers are in the driver’s seat.

John Symond of Aussie Home Loans, who is perhaps best known for his role in kick-starting the non-bank lender industry in Australia, says in the current cut-throat world of mortgages, it is every institution for itself, which is good news for borrowers.

“In a slowing housing market banks don’t want to lose market share so they are trying to poach customers from each other,” he says.

“In a slowing housing market banks don’t want to lose market share so they are trying to poach customers from each other,” he says.

Symond says borrowers should perform a “health check” on a regular basis.

“Australians have been quite apathetic and don’t go and check up on their financial commitments as regularly as they ought. Some never do it and the banks profit from that,” Symond says.

“People say, ‘It’s probably all too hard. It’ll probably be more expensive than what I think. Yeah, I’ve read about switching, but it’s probably going to take a lot of time and a lot of money and it mightn’t save me much.’ So they just stay with what they’ve got.

“People look at it when they are buying a car, or think ‘We need $20,000 to build a new kitchen, how are we going to get it?’ They don’t look when nothing’s happening.”

And Symond says it should not just be about interest rates.

“In terms of rates there’s not much difference between lenders, but where you can get caught up is the hidden fees that aren’t apparent,” he says.

Commonwealth Bank general manager of mortgage wealth, James Sheffield, says banks offer attractive deals to new and existing borrowers all the time, but not everyone lets their institution know when their circumstances change.

“There have always been people who are more proactive with their finances and those who are less so,” he says. Sheffield also says a regular loan health check makes sense.

“You should look at your loan every two years and if you change jobs, salaries, have a baby or experience any other life event, see your lender and say to them very clearly, ‘This has changed; is this still the loan that works for me?’ ”

In a recent study of more than 2000 Commonwealth Bank customers and non-customers, only 66 per cent believed their home loan was right for them and 47 per cent hadn’t looked at their loan in the past five years.

by Kirsten Craze | The Daily Telegraph

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