10 Steps To Get Lower Home Loan Rates
Isn’t it annoying when you buy something from a shop, only to see it for sale somewhere else at a much cheaper price?
This can happen with your home loan, too. At the time you got it your home loan might have had the best interest rate around, but the Australian loan market is highly competitive and rates change all the time.
Lenders are more disposed than you might think to offer discounted rates and favourable terms in order to keep their customers. But if you don’t ask, you don’t get.
Here are 10 steps savvy borrowers can take to get a better rate and improved features from their home loan.
- Check your lender’s website every 3-6 months to see their current offers (aimed at attracting new customers).
- If you see a lower rate on a similar loan to the one you have, call your lender and tell them you saw on their website that they now offer it.
- Most likely they will tell you some story about why you don’t qualify.
- Ask to speak with someone from their Retention team (a.k.a Customer Care) as you’re not happy about paying so much more and you’re thinking of leaving.
- They will either pass you through or tell you that someone will call you back within 48 hours or so.
- When that someone calls, that someone will say that the best they can do is x.xx% (usually about 10 points more than as advertised).
- Accept that offer.
- Enjoy the savings! (paying for example 5 points less on your mortgage is equal to reducing $500 p/a on a $1M loan!)
- Rinse and repeat after 3-6 months.
- If the above fails and you’re considering switching lenders, speak with your broker and don’t forget to consider all the costs of refinancing that may be involved, such as application fees and break costs for changing an existing home loan.
Many banks rely on the fact that most people are too lazy or don’t care enough to refinance their home loan. But if you discover the interest rates you’re being charged are above market value, there’s nothing to stop you from considering taking your business elsewhere.
A lower interest rate means more disposable income in your pocket, but there are lots of other benefits for refinancing a loan, you can:
- Access equity if you need it for a deposit for an investment property,
- Consolidate a number of outstanding debts into one debt
- Split your loan between fixed and variable rates, and
- Access features such as or offset account or redraw facilities.
It would be prudent for your bank to put up a bit of a fight to keep you, after all it’s easier to maintain existing customers than attract new ones.
If you have a good history and credit score then they will hopefully make you an offer to match the one you’ve seen elsewhere. If not, switching banks isn’t a difficult process and a small bit of effort now could save you thousands of dollars in the future.
You may also enjoy a one-off bonus from a new lender for signing up with them.
If you’re thinking about refinancing your home loan or switching banks, get in touch with Ethan today to discuss your personal circumstances and get an expert’s advice!