Is Your Home Loan Still Working For You?

Most of us spend more time researching a new phone than we do reviewing our home loan. And yet for the average Australian household, a mortgage is the single biggest financial commitment they'll ever make.

If you haven't looked at your home loan in the last two or three years, there's a reasonable chance it's no longer the best option available to you. Here's how to tell.

The "Set and Forget" Trap

It's incredibly common. You work hard to get your loan approved, breathe a sigh of relief at settlement, and then life takes over. The repayments go out, the years tick by, and the loan just… sits there.

The problem is that the lending market doesn't stand still. Interest rates move, new products emerge, and lenders regularly offer their sharpest deals to new customers rather than existing ones. Loyalty, unfortunately, isn't always rewarded in banking.

The result? Many borrowers are quietly paying more than they need to — sometimes thousands of dollars more per year — without realising it.

Signs Your Home Loan Might Be Due for a Review

You don't need to be a finance expert to spot the warning signs. Here are some situations where it's worth taking a closer look:

• Your fixed rate period is ending — When a fixed rate expires, loans typically roll onto a standard variable rate, which may not be competitive. This is one of the best windows to act.

• You haven't reviewed your loan in more than two years — The market changes. What was a great rate in 2022 may be unremarkable today.

• Your financial situation has improved — A higher income, a stronger credit profile, or more equity in your property may mean you now qualify for better terms than when you first applied.

• You're paying for features you don't use — Some loans come with offset accounts, redraw facilities, or package fees. If you're paying for them but not using them, you may be better off on a simpler, cheaper loan.

• You've built up significant equity — As your property value grows and your loan balance reduces, your loan-to-value ratio (LVR) improves. Some lenders offer better rates for lower LVR borrowers, and you may now qualify.

  
  

What a Loan Health Check Actually Involves

A loan health check is essentially a review of your current mortgage against what's available in the market. A mortgage broker will typically look at:

• Your current interest rate versus comparable products on the market

• Your loan features and whether you're actually using them

• Any fees attached to your loan (annual fees, redraw fees, break costs if you're on a fixed rate)

• Whether your loan structure still suits your goals — for example, if your circumstances have changed and an offset account would now save you money

• Whether refinancing makes financial sense once any switching costs are factored in

  
  

The goal isn't to push you to refinance for the sake of it — it's to give you a clear picture of where you stand and what your options are.

How Much Could You Actually Save?

It depends on your loan size, your current rate, and what's available — but the numbers can be significant. On a $600,000 loan, a difference of just 0.5% in interest rate translates to roughly $3,000 per year in repayments. Over the life of a loan, that compounds considerably.

Even if the rate saving is modest, there may be other benefits: a better loan structure, access to an offset account that reduces your interest, or simply removing an annual package fee that's no longer worth paying.

When Refinancing Might Not Make Sense

A loan health check doesn't always lead to a switch — and that's perfectly fine. There are situations where staying put is the right call:

• You're on a fixed rate with significant break costs still to run

• You've recently applied for credit and your file needs time to settle

• The cost of switching (discharge fees, application fees, legal costs) outweighs the savings over your intended timeframe

• You're planning to sell or significantly restructure your finances in the near future

A good broker will tell you honestly whether it's worth moving or not.

The Bottom Line

Your home loan shouldn't be a "sign and forget" commitment. A periodic review — even just once every couple of years — can save you real money and make sure your loan is still working as hard as you are.

Not sure if your loan is still competitive? Book a free loan health check with Cultivate Financial — we'll give you a straight answer with no obligation to switch.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend you consider whether it is appropriate for your circumstances. It does not constitute legal, tax or financial advice — please seek professional advice for your individual situation.