Home Loan Rate Review: How to Check You Are Not Overpaying

A home loan rate review is the simple habit of checking, on a regular basis, whether the interest rate you pay still measures up against what other lenders offer. Most people set their mortgage once and never look at it again, yet rates move and lender appetite changes. Running an annual mortgage review, or sooner when the market shifts, is how you find out whether your current rate is still fair or whether you could be paying more than you need to. This guide walks through how to check your home loan rate, what to compare, and what to do with the answer, drawing on independent government guidance so you can gather the facts before any decision.

This is general information only. What suits you will depend on your circumstances and each lender’s criteria.

The guidance below draws on the Australian Securities and Investments Commission, known as ASIC, and its MoneySmart service, the government’s independent money guidance. Whether any change makes sense depends on your figures, so treat a home loan rate review as a way to gather facts, not as advice that you should switch.

If a review points toward a move, the rate, costs and lender decisions come together on our refinance home loans hub.

Why a home loan rate review is worth the effort

The reason a rate review pays off is that home loan pricing is not consistent across the market. MoneySmart notes there can be an interest rate difference of more than 2% in variable home loan rates on the market. On a large balance over a long term, even a fraction of that gap is real money, so the point of a review is to find out where your rate sits in that spread.

A review is not the same as switching. It is the step before. You are simply checking whether your rate is still competitive. Sometimes the answer is yes and you do nothing. Sometimes the answer is no, and you then have a separate decision about whether acting on it leaves you better off once any costs are counted.

How often should you review your home loan rate?

A sensible rhythm is once a year, which is where the idea of an annual mortgage review comes from, plus a check whenever something changes. Variable rates can go up or down as the lending market changes, for example when official cash rates change, so a shift in the market is a natural prompt to look again. The end of a fixed term is another, since a fixed interest rate stays the same for a set period such as five years before reverting to a variable rate or being renegotiated. If you are coming off a fixed rate, a review before it ends helps you avoid drifting onto a revert rate without checking it.

How to check your home loan rate properly

Knowing your headline rate is only the start. To check your home loan rate in a way that means something, compare like with like.

Use the comparison rate, not just the advertised number. A comparison rate is a single figure that shows the cost of a loan, including the interest rate and most fees, so you can weigh loans on a fairer basis. Two loans with the same headline rate can sit very differently once fees are folded in. Our comparison rate explained guide goes deeper on what that figure does and does not capture.

Account for the fees attached to your loan. An application fee is a one-off payment when starting a loan, also called an establishment, up-front or set-up fee, while ongoing fees are charged every month or year for administering a loan. These feed into the comparison rate and into what your loan really costs you.

Factor in the features you use. Loan features such as offset accounts and redraw facilities are ways of putting extra money against your loan to reduce the interest you pay. A slightly higher rate with an offset you actually use may serve you better than a lower rate without one, so judge the rate alongside the features, not on its own.

How your rate translates into a monthly figure is the other half of the picture, which our guide to home loan repayments walks through. For the bigger picture on where rates come from, see how home loan interest rates work.

What to do if your rate is no longer competitive

If the review shows your rate is off the pace, you have options, and the cheapest one is often the first one.

Ask your current lender first. A good opening move is to tell your lender you are thinking about a cheaper loan elsewhere. To keep your business, your lender may reduce the rate on your current loan, which gets you a better deal with no cost or effort of moving. If you have at least 20% equity in your home, you have more to bargain with.

Weigh the cost of moving against the saving. If you do look to switch, the costs to check before switching include a break fee on a fixed-rate loan, a discharge or termination fee to close the current loan, and an application fee on the new loan. If you have less than 20% equity in your home, you might have to pay lenders mortgage insurance (LMI) again, and it is worth asking your current lender about a refund of the LMI you already paid. The trap is moving for a saving that the costs quietly eat up. Our guide to what lenders mortgage insurance is explains how that cost works.

Run the numbers before you decide

The final step is to test the trade-off with real figures rather than a feeling. A mortgage switching calculator can help you work out whether you could save money by switching and how long it could take to recover the cost of switching. A quick rate check is a useful companion, showing whether the rate you pay now, or a rate on offer, still looks competitive once you read it alongside the comparison rate.

Try the rate check calculator to see where your current rate sits before you go any further.

How a home loan rate review works, step by step

Pulling it together, here is the order to work through for a thorough review.

Where Finance Lab fits in

Gathering these facts gets the decision onto the table. Reading them against your income, your equity, your goals, and a panel of lenders is where it gets personal, and that is where guidance helps. The team at Finance Lab can talk you through how your rate, your fees, your features, and your loan term come together for your circumstances, and which lender criteria you may need to meet.

Frequently asked questions