How often should you change your home loan?

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The findings revealed in The Australian Mortgage Council’s latest quarterly home loan report, are the results of a survey by RFi Group.

The survey of 2023 mortgage holders, also shows another one in four people (23 per cent) have not changed their home loan in the past five to 10 years.

About half of those surveyed (52 per cent) have not changed their home loan because they are “satisfied” with their current loan and have “no reason to refinance”. Surprisingly, 22 per cent of mortgage holders say they have never considered refinancing.

The results are astonishing says HSBC Australia head of mortgages Alice Del Vecchio. She believes people should review their mortgage “whenever their circumstances change” or about once every year or two.

“Most home loans are typically set up for 25 to 30 years – a lot of things can change in that time. You need to have someone review your loan regularly to see if it best suits your circumstances,” she says.

The RFi survey also shows the reasons why people are “highly likely” to refinance or have switched lenders in the past six months. The most common motivation is to access lower interest rates (35 per cent), followed by the desire to reduce their monthly repayments (24 per cent) and, equally important, because they are “generally dissatisfied” with their lender (24 per cent).

Del Vecchio says people often come into the bank to talk to their banker about a change in their circumstances. “There’s usually a trigger, such as a change in employment. They might be taking six months off work to have a baby and simply want to change their repayments. Or, they might have changed jobs, are earning more money and want to increase their repayments. Sometimes they come in with one idea, and walk out with another plan after discovering options they hadn’t considered or didn’t realise existed.

“For example, it’s not uncommon for someone to come in saying they’d like to increase their repayments and pay off their mortgage faster, because they’ve had a big pay-rise. After talking to their relationship manager, they might find they can afford an investment property and use the extra money for that instead.”

She says HSBC relationship managers can access industry intelligence to help people decide whether renovating and extending their existing home will be more cost effective than upgrading to a more expensive home. “For example, someone has a two-bedroom semi-attached home in Randwick that’s worth $1.6 million, and they’re looking to spend $600,000 on a renovation, adding two more bedrooms. If our intelligence shows that four-bedroom homes in the area have failed to crack the $2 million mark, then we can inform them that spending $600,000 might be over-capitalising.

“A relationship manager can’t expect people to know about all the products that are available on the market and how they work, it’s the banker’s job to talk regularly to their customers, review their loans and explain how other products or features work and why they might be more beneficial.”

This article was originally published on Domain