Do You Know Your Home Loan Rate?

July 12, 2018


Of all the numbers you have to keep track of – telephone numbers, password codes, birthdays – the one that will impact your life the most a lot of people don’t remember: your home loan rate. A recent survey by UBank has revealed that as many as 82% of homeowners in this country do not know the interest rate on their home loan.

Your mortgage rate is not something you want to overlook. Not just because the rate you are paying down your home loan at dictates the overall cost of probably your biggest purchase in life, but also because this is one number you do have some control over. If your rate isn’t working for you, the only way to fix it is to know there is a problem in the first place.

The Current Numbers

UBank’s 2018 report, The UBank Know Your Numbers Index, revealed that the number of people who do not know their interest rate is still remarkably high. In 2016 and 2017, 84% and 85% of Australians, respectively, weren’t sure of their home loan rate. That number has only dropped slightly in the past year – down to 82%.

About half of the survey participants who didn’t know their rate at least had an approximate idea, but still, a good 40% or so each year have no idea.

After seeing the results of this survey, the CEO of UBank, Lee Hatton, provided some advice for all homeowners. She said that homeowners should not only know their home loan interest rate, but they should also continually be checking the interest rates of various banks to see if a better deal is possible.

Hatton went on to say that your home loan is certainly one of the largest investments you will make in your lifetime. Getting a lower interest rate on that loan could be a great way to save many thousands of dollars.

Many Australians Are Under Financial Pressure

The irony is, the same survey found that the majority of Australians feel stressed out by their current financial situation. But, not knowing may be the foundation of financial stress, rather than the actual current state of your finances.

By knowing your home loan rate, as well as your other monthly expenses, you have more power to take control of your money, to reign in overspending, and to reach a place of financial security and freedom.

But, when you don’t know – or don’t want to know – you aren’t in a position to make improvements to your financial health.

Once there is some stress being felt over your ability to make the payments, you, like many other Aussies, may start to make sacrifices and tough financial choices that can impact your quality of life. Hatton says that the more you are aware of the numbers, the better prepared you can be to deal with your debt. It can enable you to refinance to create less debt, allowing you to have a better life.

Right now, only about 20% of Australians say they have full control of their finances. Instead of feeling like debt and financial obligations are controlling your life, make a habit out of knowing your home loan rate, as well as other important numbers like your total debt and also how you are doing with your retirement saving and investment goals.

And, identify where you can make changes. One of the best ways to turn your financial situation around could be to refinance your home loan. If you can switch to a lower rate, you may be able to reduce your monthly repayments, lower the total cost of your loan, and pay it down faster.

Refinancing Could Improve Finances

The report put out by UBank further indicated that about one-fourth of those surveyed knew that they could save money by refinancing their mortgage. They also felt that it was a good idea, but they had not yet discovered the best rate.

If you are in a good position to refinance – if your credit is good and you have enough equity built up in your home – take a look at the home loans available from different lenders. Use a mortgage switching calculator to compare how much you could save if you switch to a lower rate, keeping in mind things like maintenance fees for your new home loan and how much it will cost you to refinance.

When you look at the numbers, you may find that taking control of your home loan rate with a better mortgage will help to alleviate a lot of the financial stress you may be dealing with.

Take for example the following savings comparison: For a loan amount of $450,000, switching from an interest rate of 4.2% p.a. down to 3.68% p.a. could save you $134 every month. Over the course of a 30-year loan, you could save a total of $48,380! How’s that for helping you sleep at night?

Even with the costs of refinancing, which can hover around $1,000 as long as you don’t have any break costs or exit fees to deal with and you don’t have to pay lender’s mortgage insurance, you could still save tens of thousands of dollars.

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How to Get a Better Home Loan Rate

In order to get a lower home loan rate, there are a few techniques you can use.

  • First, do your research. Check out the local property market in your area and look at the interest rates lenders are offering. Compare the most competitive rates with what you are paying to see if you may be able to save. If you can reduce your rate by half a percentage point or more, it may be worth it.
  • Then, negotiate. When you know what other lenders are charging, you are in a better position to negotiate with both your own bank and other lenders. Let your bank know you want to refinance to a lower rate but want to know if they will give you a good deal first – you’ll reduce your refinancing costs by staying with your current bank.
  • Be firm. In the case of refinancing with a new bank, make sure you are clear about what you want – the loan rate as well as features. You may be able to negotiate with your new bank as they’ll want your business.
  • Double check costs. Before making the switch, it’s a good idea to sit down with each your old and new lender and have them spell out any closing costs and start-up fees. Make sure you know exactly what you are walking into so you don’t end up paying more than you had assumed.
  • Speak to a mortgage broker. Home loans can seem complicated, so speaking to a mortgage broker can help make refinancing easier. A broker’s purpose is to do all the hard work for you, using their experience and knowledge of the market and of your borrowing profile to get the best possible loan for you. When you work with a broker, they are able to take an objective look at your needs to help match you with the perfect loan. This is because they are not connected with any one bank or lender. A broker works with many different banks and non-bank lenders. This gives you access to a huge pool of 100’s of home loan products.

If you do refinance, don’t forget to keep track of your home loan rate in the future. Make sure you know what you are paying and track how your rate changes if you are paying a variable rate loan. You can always refinance again in a few years to get an even better deal!

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