A surprising number of mortgage holders have confessed they don’t actually know their home loan rate.
The Know Your Numbers Index, released by UBank, found a considerable number of Australians aren’t clued in to key details about their mortgages.
The survey found 82% didn’t know their exact mortgage interest rate, with 36% admitting they didn’t know it at all. Furthermore, 76% didn’t know what they were spending on fees.
If you’re a bit behind on the details of your home loan, here are some things you should check on and why you should keep on top of them.
While knowledge of mortgage rates improved over the past year according to the latest UBank Index, the vast majority still aren’t sure of their precise rate.
With rates at record lows, it’s a great time to get familiar with these numbers.
According to Finder, the average interest rate in August 2019 was 4.21% to 4.10% for one and two year fixed rate loans respectively, moving up to around 5% for variable rate loans.
If you’re paying considerably more than this, it could be an ideal time to refinance and save some big bucks. Of course, the aforementioned figures are a monthly average, so your actual interest rate could be more or less depending on your loan type and personal circumstances.
If you already have a variable rate loan you may not need to refinance. However, you should stay on top of these figures consistently in the future, particularly if they go up.
On average, Australians estimate that they pay $328 per year in fees. This is considerably lower than the $468 indicated by the Reserve Bank (RBA). In fact, only 20% of Australians knew or accurately guessed the annual fees on their home loan.
Here’s why this is not great though most Aussies aren’t completely aware of their fees, 47% reported that they hated paying fees. This is understandable, but you may not realise that you could have the option to pay less or even zero fees with a different mortgage deal. It could save you hundreds every year.
These are the ongoing fees you should know:
Monthly fees: Some lenders charge a small monthly service fee for account maintenance or administration. This may be between $5 and $15.
Yearly fees: Some lenders may also charge a yearly fee, which is usually used to offset or discount low interest rates or other perks of a home loan package. These are usually between $300 to $400+.
You will typically incur a range of fees upon the commencement or signing of your loan or upon exiting or breaking the loan. But in terms of fees you may incur during your loan, you should also check if you’re being charged redraw fees or late or early repayment fees.
How can I save?
The first option is to refinance. With a string of RBA cash rate cuts, it’s a good time to take advantage of great lending conditions.
Furthermore, UBank CEO Lee Hatton believes people currently paying 4.19% on a 30 year, $400,000 home loan could end up paying $41,000 more than they need to. Mozo also predicts that a 25 year, $300,000 loan with a variable rate of 3.50% could save nearly $20,000 by refinancing.
However, it’s important to weigh up the various fees, actual long term savings and what you can afford before taking the plunge. Here are some refinancing tips to get you started.
The other option is to craft a budget in order to get to know your mortgage rates, plus other monthly expenditures. This strategy will help you gain control of your finances.
Hatton says the Bureau of Statistics has uncovered that the cost of living in Australia rose 2% last year and is the strongest pace growth we’ve experienced in 3.5 years making it crucial for Australians to be aware of the numbers.
Having your finances sorted is an important part of maintaining a balanced lifestyle and, unfortunately, too many Australians are experiencing the effects of not understanding their finances.
If you take the time to thoroughly go through your finances, it should make it easier going forward to stay on top of things.
Unsure if your current rate is best for you and your circumstances? It may be time to contact eChoice. Our brokers have access to 100’s of products and have helped thousands of Australians secure the right home loan at an affordable rate.
Words by Rebecca Mitchell