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negotiate a new home loan rate

You’re not alone if you are feeling anxious at the moment, watching mortgage repayments go up months on end. Negotiating a lower home loan rate either with your current lender or with another lender could potentially save you hundreds or even thousands when it comes to your interest repayments.

So how can you go about negotiating a lower rate and reducing your home loan repayments? The team has prepared some tips to help you in the process!

Research

The first step is to do your research. Look into how your rate stacks up against those offered by other lenders.

Firstly, look at your current lender and the rate they are offering new customers. You can then look at the best rate being offered by other lenders, particularly your lender’s key competitors. If their competitors are offering a lower rate, you will have more room for negotiation.

It is important that you are comparing similar loan products. For example, investment property loans may differ from an owner-occupied home loan rate. When you are researching rates, make sure you are looking at the comparison rate as opposed to the headline rate as this represents the true cost, taking into account fees and charges.

 

Understand your strengths and weaknesses

As with all forms of negotiation, it is important that you understand which factors can strengthen your case and what your lender may see as a limitation. For example, if you have a great repayment history or a substantial balance on your loan, you are more likely to have a strong case. If you have a small loan with missed repayments, your lender is less likely to budge on your rate. 

It is also important to understand your Loan to Value Ratio (LVR) and how it will play a role in your negotiation. LVR refers to the size of your loan compared to the value of your property. If your LVR is over 80%, lenders are likely to charge higher rates and be less willing to reduce a rate as the loan is considered higher risk. If you have a LVR lower than 70%, you have a better case for negotiating a lower rate.

 

Put your case forward for a lower home loan rate

Now it is time to call your lender. Let them know that you would like to review your home loan rate based on market research that you have completed. Have your research handy and explain any strengths that may support you in your negotiation. 

Your lender may make an offer on the spot, or they may review it in their own time and contact you at a later stage. If they are not willing to reduce your rate, consider whether it is worthwhile looking at other available options provided by other options. 

 

Seek support from a mortgage broker

If you need support throughout this process, we recommend seeking support from a Mortgage Broker who will be able to do most of this work for you. Mortgage brokers often provide free services, as they earn commission from the chosen lender. Make sure you check if there are fees involved and research a trusted broker who has your best interests in mind. 

Speak to an APS trusted Mortgage Broker or get in touch to discuss APS Home Loans.