Is Your Mortgage Collecting Dust? The Hidden Cost of “Setting and Forgetting”
When you first signed your mortgage documents, you likely scoured the market for the absolute best deal. You compared rates, haggled over fees, and finally signed on the dotted line with a sense of victory.
But that was then. If it has been more than two years since you looked at your home loan, that sense of victory might be costing you a fortune.
In the finance world, this is known as the “Loyalty Tax.” Banks often offer their most aggressive, rock-bottom interest rates to new customers while leaving existing loyal customers on higher, outdated variable rates.
If you are wondering whether it is time to make a move, here is the strategic guide to navigating the refinancing landscape in the current market.
1. Interest Rates Have Moved (Have You?)
The most obvious reason to switch is the interest rate. Even a difference of 0.50% can save you hundreds of dollars a month on a substantial mortgage.
However, don’t just look at the headline rate. Look at the comparison rate, which includes fees. If your current lender hasn’t passed on recent rate cuts—or if they have hiked your rate faster than the RBA averages—it is a clear signal to look elsewhere.
2. Your Home Value Has Likely Changed
This is the hidden lever of refinancing: Loan-to-Value Ratio (LVR).
If you bought your home a few years ago, property values in many areas have increased. If your home is worth more now, your equity has grown. This puts you in a lower risk bracket for lenders.
When you go to refinance home loan products, a lower LVR (e.g., under 80% or 60%) often unlocks “tier-one” interest rates that weren’t available to you when you bought the property with a smaller deposit. This is particularly true in specific high-growth capital cities. For example, homeowners looking for competitive options to refinance home loan packages in markets like Brisbane are finding that increased property values allow them to negotiate significantly better cashback offers and lower rates than they could two years ago.
3. Debt Consolidation: The Cash Flow Fix
Refinancing isn’t just about the house; it’s about your total financial health.
With the cost of living rising, many homeowners are choosing to refinance to consolidate other high-interest debts (like credit cards or car loans) into their mortgage. While this extends the life of that debt, the interest rate on a mortgage (e.g., 6%) is drastically lower than a credit card (e.g., 20%), instantly freeing up monthly cash flow.
4. Features You Actually Use
Are you paying a $395 annual package fee for a credit card and an offset account you never use? Or conversely, do you desperately need an offset account to lower your interest bill, but your current “basic” loan doesn’t offer one?
Refinancing allows you to right-size your loan features to your current lifestyle, not the lifestyle you had when you were a first-home buyer.
The Verdict
Your mortgage should be a tool that builds wealth, not an anchor that drags it down. If you haven’t reviewed your rate in the last 24 months, you are likely paying a premium for loyalty that the bank isn’t rewarding.
Take an hour this week to compare your rate against the market. That single hour of “financial admin” could earn you more per hour than your actual job.
0 Comments