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Whatever your lending situation, now is a better time than ever to review your loans – and there are plenty of opportunities available for anyone who does so

Usually, when you review your loans, what do you do? You ask the bank whether the loan can be structured in a particular way. You would then ask the bank for the best interest rate possible.

The most common response to such a request is that they will tell you what they cannot do and that there are only certain structures that are possible. Further, if you’re lucky, they may reduce the interest rate slightly.

What we end up doing is leaving the control of our lending in the hands of our bank … shouldn’t the control be with you?

Your mortgage should not be set-and-forget, with repayments simply being deducted from your account. You should be reviewing your loan about every three years to make sure you’re not paying more than you have to in interest, or to take advantage of new package benefits which are being frequently introduced to the market.

With good advice, we should have a clear picture of the ideal loan structure to suit our affairs. Consideration must be given to variable or fixed interest rate, or a combination of the two. Is it appropriate for the loan to be repaid as principal and interest or is interest only more suitable? Is a line of credit the way to go or should we consider an offset account … indeed should we consider multiple offset accounts?

These structural issues are important to ensure your needs are best met. However, very rarely do I see banks set up loans in a manner that is most beneficial for the customer. The right structure can make a substantial difference to you over time.

We are in an environment of fierce competition. In fact, lenders are climbing all over each other to attract customers. What this means for you is that if you are willing to shop around, there are plenty of opportunities to make your loan cheaper.

So what’s the bottom line? If it’s been three years or more since you last checked your loan (for your home or for investment purposes), there might be a few surprises in store.

You could be paying too much interest, or there may be some package benefits on the market that you’re simply not aware of.

To find out the best way to review your loan, speak to your financial adviser. And take the control away from the bank and put it back in your hands.


Posted by Thabojan Rasiah – Money Manager (Fairfax) on 22nd July, 2015