Did you know The Reserve Bank has left the official cash rate on hold at 1.5 per cent, the lowest in Australian history, for the 29th consecutive month in February? Despite this, some of us are paying way too much in interest – and even ten basis points (or a tenth of a per cent) can make a massive difference on a 25-year loan.
So how can you negotiate a better mortgage interest rate? It can feel daunting, marching into your big bank and standing up for the littlest guy there is. But you can tip the scales in your favour – here are five ways to negotiate a better rate on your mortgage.
5 ways to negotiate a better rate on your mortgage
1. Do your research.
Doing your homework is crucial to success in negotiating a better mortgage rate. Knowing more than your opponent and citing facts and data about preferable deals that are out there will give you considerable bargaining power. Don’t just look on websites for good interest rates – go in and talk to lenders and banks as if you’re a new customer or have made up your mind already about refinancing. Their lenders may give you cut-price rates not marketed to the general public.
2. Ask your lender what they’re offering new customers.
Banking is like any other business. You cannot take your customers for granted. With so much competition out there for your dollars – not just among the ‘Big Four’ but with smaller banks, non-bank lenders and credit unions – banks should be doing everything in their power to keep your business. Ask them what kind of deals and financial products they’re offering their new customers to entice them to sign on the dotted line.
Don’t be afraid to say you’re a long-time customer or a borrower who’s always paid their loan on time or have many different accounts with them. If they don’t offer something straight away, speak to someone on their client retention or customer service team – usually, they’ll ‘find’ a discounted rate or deal that’s better. If they still don’t budge, it’s time to speak to a broker.
3. Consult a broker.
Mortgage brokers can help you find a better rate among many different banks and lenders, and will tailor a package to suit your needs. ‘A broker is your advocate when it comes to finding a home loan with a great rate‘, says broker and CEO of Savvy, Bill Tsouvalas.
‘We do all the research and find mortgage rates that will best suit you. We also have rates and loan packages that aren’t advertised to the general public. Your success is our success when it comes to getting a good deal’, Tsouvalas advises.
4. Prepare to walk.
Some banks and lenders might take your business for granted. If that’s the case, then get ready to refinance with a new lender. Though it might be a bit of short term pain, think of the long term gain – even a 0.2 per cent difference on a $400,000, 25-year loan means a saving of $12,794 (assuming $10 in monthly fees). It’s your money, and you have every right to spend it wisely.
5. Do an annual checkup.
Don’t get complacent – do a checkup of your loan situation every year to ensure you’re getting the best deal possible. Lenders and banks are counting on you to leave your mortgage running.
‘Getting into a good relationship with a broker can bypass some of the research and paperwork when it comes to doing a mortgage health checkup,’ says Tsouvalas.
Tsouvalas reminds us, ‘brokers are always on the lookout for great deals and are proactive about it. It’s what we do for a living’.
Hopefully, with these tips and some research, you’ll have the confidence to negotiate a lower interest rate on your mortgage successfully.