Investment Tips

How To Negotiate A Better Rate With Your Bank – Save Money On Your Home Loan

Marissa Schulze | September 24, 2021
How To Negotiate A Better Rate With Your Bank – Save Money On Your Home Loan

With Interest rates at an all time low and competition at an all time high, now is the perfect time to get a better interest rate on your home loan and save yourself some big $$$. Unfortunately Banks are great at rewarding new customers with great discounts and special offers but often neglect to reward existing loyal customers. Therefore, it is up to you to make sure you are continuously getting the best rate possible on your home loan!

Our friend Marissa Schulze, Director of Rise High Financial Solutions has 5 steps to help you negotiate a better interest rate with your current bank:

Step 1 – Know your loan and your interest rate!

Specially make sure you know:

– Your interest rate;

– Whether your loan is fixed or variable;

– Whether your repayments are Interest Only (IO) or Principal & Interest (P&I); and

– Are you paying owner occupier interest rates or investment interest rates.

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Once you know exactly what loan product you have and what it is costing, you can start exploring whether making some slight changes to your existing loan would automatically help to reduce your interest rate. For example, if you are currently making IO repayments you might like be eligible for an automatic interest rate discount by simply converting the loan to P&I. If your loan is variable you may also find savings by simply fixing the interest rate to a lower interest rate. Also consider the features you are currently paying for and whether these features are really adding value to you. For example, an offset account is a fantastic feature if you use it well but if you find that you hardly ever have any savings in your offset account perhaps you are better switching to a more basic product that has a lower interest rate. Only pay for the features you need!

Step 2 – Research Competitor offers and compare them to your current loan

The best and most efficient way to do this is to engage the services of an experienced and professional Independent Mortgage Broker who has access to a large panel of lenders and can provide you with an indication if your current rate is competitive and what other opportunities might exist for you to save money.

Step 3 – Contact your bank

Once you are armed with the knowledge of how much you could potentially save and what competitors are offering it is time to contact your bank and speak to their retention team to proactively ask them to reduce your interest rate. This is either something you can do yourself or you can once again ask your Rise High mortgage broker to do this on your behalf. Often your Rise High mortgage broker will be able to get a better response and outcome for you as they have better negotiating power with the banks. The best results often come when the bank is afraid of loosing you as a client so the threat of refinancing away from your current bank has to be believable.

Step 4 – Be prepared to consider refinancing

If your bank will not come to the party, you need to be prepared to consider refinancing. Whilst it can seem like hard work, a 0.5% reduction in your home loan rate could save you approx. $2,000 per year on a $400K loan so it is definitely worth doing. After all, this money is better in your pocket than the bank’s! Also, if you are dealing with a great Rise High mortgage broker they will make the process easy and take all the hard work out of the process.

Step 5 – Review your loan

Once you have sorted out your home loan and are enjoying your new savings, you need to ensure you don’t rest on your laurels. You should be going through this review process at least every 24 months to ensure that your home loan and investment loans remain competitively priced. A great Mortgage Broker will proactively do these ongoing home loan reviews for you at no charge to you, so this is definitely something to look for when selecting the right Mortgage Broker to support you.

Ultimately if you are time poor and/or don’t like asking for discounts, the best thing you can do for your bank balance is to work with a great mortgage broker who will not only conduct a free review of your loan but will also take all of the hassle out of any steps required to get you a great interest rate and have you saving money sooner!

Are you interested in a free interest rate review? Contact Rise High Financial Solutions on 08 7131 1149

Article by Marissa Schulze