5 reasons Aussies are paying too much for their mortgage

A mortgage is the largest monthly expense for a homeowner, so you would think Aussies would do everything possible to save as much as they can.

But according to a recent report, nearly 83% of homeowners are paying too much for their mortgage because they haven’t made enough effort to find the best deal or haven’t switched in effort to save money.

Also read: Australian banks are clamping down on foreign buying of homes

Here are five signs that you’re paying too much.

1. Your interest rate is above 4%

Interest rates have reached record lows in Australia and homeowners could be saving hundreds of dollars per month by refinancing their mortgage to reduce their interest rate.

Any Aussies with a mortgage rate higher than 4% should seriously consider taking advantage by shopping around for a better deal.

Also read: Aussie property prices set to fall further as conditions deteriorate

2. Your adjustable-rate mortgage has adjusted

If your adjustable-rate mortgage has just reset to a higher rate, you may be feeling squeezed by your new monthly payments.

If your new interest rate and monthly payment have risen, it's worthwhile to determine if refinancing to a new 30-year fixed mortgage could save you money.

3. Your credit has improved

Aussies with fair or poor credit when they applied for their mortgage may be paying an additional premium on the interest rate.

If the situation has changed and credit has improved, its likely the interest rate being paid is too inflated.

4. Your income has increased

The total cost of your mortgage is determined by the term of the loan.

So if your wage has increased then you’ll also be able to pay off your loan quicker.

By refinancing to a shorter term loan Aussies can lower their interest rate and also lower the total interest paid over the course of the loan.

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5. You have a jumbo loan

Mortgage holders with a jumbo loan (over $417,000) generally pay higher interest rates.

Over the last couple of years the gap between regular loans and jumbo loans has been widening meaning jumbo loans now cost significantly more.

But now that spread is narrowing again so Aussies with jumbo loans might be able to take advantage of better rates.