Finance Your Budget Six tips to help you renegotiate your home loan

Six tips to help you renegotiate your home loan

Home loan calculation
"Now wouldn't be the craziest time to fix," one analyst says. Photo: Getty
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With interest rates at all-time lows, and lenders signing up fewer loans than usual, there’s never been a better time to get a better home loan deal.

And getting that better home loan deal could be as simple as asking the question.

With fixed-rate loans for less than 3 per cent, and standard variable rates starting at 3.09 per cent, combined with weak home lending figures, it may be the perfect time to start shopping around.

The big four banks, for example, are all now offering two- and three-year fixed rates for less than their variable rates.

Insights manager with comparison site Finder, Graham Cooke, told The New Daily that with lenders desperate to hold on to clients in the less fluid home loan market, it can be a case of simply approaching your bank or lender.

“Often, you don’t have to refinance, you just have to threaten to refinance,” Mr Cooke said. “And they will often go out of their way to keep you as a customer.”

And it’s only going to get better for anyone with, or looking to get, a home loan, he says.

Mr Cooke said 50 per cent of Finder’s panel of 46 economists believe the official cash rate will hit 0.50 per cent (down from the current 1 per cent), with 35 per cent believing the RBA will only cut once more to take the rate to 0.75 per cent.

Mr Cooke said even with lenders somewhat hamstrung as to how much of those cuts they can pass on, borrowers can still look forward to even better deals, be it one rate cut or two.

Ratecity research director Sally Tindall said knowing whether to fix now, or speculate on the response of lenders to more RBA cuts, was a “crystal ball exercise”.

“Yes, rates are at record lows and may fall further, so now wouldn’t be the craziest time to fix,” Ms Tindall said.

“But it really depends on your personal financial situation and personality.

“If you are someone who likes to know what your repayments are each month, then fixing could be an option.

“But if you are someone who doesn’t like getting stuck in a contract, or missing out, then a variable rate could be better.”

A variable-rate loan will give you more flexibility, as you can make extra payments without penalty and you’re not locked in to a fixed-term contract, which allows you to refinance more easily.

Ms Tindall said borrowers seemed to be adopting a wait-and-see approach, banking on more cuts.

Latest ABS data has showed about 14 per cent of new owner-occupier in June loans were on fixed terms – in 2008 it was around 25 per cent.

Mortgage Choice chief executive Susan Mitchell said her company’s data supported that, with more than 85 per cent of all new home loan applications for variable-rate loans.

Six tips to negotiate a cheaper home loan

Know your current rate

Most people don’t know their interest rate, particularly if they have a variable loan. Check your statement, through online banking or your banking app.

Are you an ideal borrower?

If you’ve been paying back your mortgage for a while, there are a few factors that should present you as an “ideal” borrower, meaning you are more likely to nab a lower rate. Your chances are enhanced if you live in the property, own 20 per cent or more of the property, are employed full time and are paying principal and interest.

Research your lender’s discounted rates

Check your bank’s website, or comparison sites or even call your bank pretending to be a new customer to learn what discount rate they offer. If you’re armed with these lower rates, you’ll have a much stronger argument when asking for a cheaper rate.

Research competitor rates

Go in armed with what competitors are offering. This will show your lender you’ve done your homework and know what deals are out there, which gives you bargaining power. Bear in mind, the average owner-occupier variable interest rate (for owner occupiers paying principal and interest) is 3.91 per cent, according to Ratecity. If you’re paying more than that, it’s crucial you look beyond your provider.

Consider comparison rates

Finder’s Graham Cooke argues that advertised comparison rates aren’t as significant as they used to be, as they tend to be based on lower loan amounts. But if you want to check a comparison rate using your loan amount, you can use Finder’s calculator.

Think about the fees

If you refinance out of a fixed-rate home loan, you will be up for early repayment penalties. If you are changing lender, you will also be liable for discharge fees. Mortgage Choice’s Ms Mitchell says this covers the lender’s costs involved in discharging the mortgage and varies among lenders from $140 to $500.

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