Interest rates are cheap! We know this all too well after experiencing a lovely, lengthy reprieve from higher home loan repayments thanks to the Reserve Bank’s conservative fiscal management policies over the last 18 or so months.
Many home owners and property investors are cleverly taking advantage of the low rate environment, with the former opting to get ahead on their mortgage repayments by shoveling more income onto their property related debt, and the latter leveraging their growing equity to acquire further assets for their portfolios.
But can you do better?
When it comes to loans and interest rates, this is invariably a question that most property owners consider at various stages of their home ownership experience. And rightly so, because property debt is the largest financial commitment you will make in your lifetime and even moreso for investors who own multiple residential holdings.
Well the good news is that lenders are indeed scrambling to secure new and repeat business in a bid to up their bottom line. In fact, the banks are currently waging an aggressive interest rate war that has seen 169 variable rate loan cuts since July this year, with the average variable loan falling by 0.31 percentage points since the RBA’s last official cash rate move in August 2013.
New borrowers are of course reaping the benefits of this home loan scramble, however millions of existing borrowers are missing out, unaware that just by having a conversation with their lender or mortgage broker, they could shave a significant amount of money off their monthly mortgage repayments.
While you might be grimacing at the prospect of having to perhaps switch lenders or refinance in order to secure a better home loan deal, when you do the sums and consider how much you stand to save, that unpalatable conversation with your bank suddenly becomes a lot easier to swallow.
Trimming 1% off your standard variable home loan interest rate is entirely do-able right now – we have seen and helped clients achieve this type of discount firsthand.
And when you consider that a 1% reduction would save you more than $2100 per annum in interest on a typical $300,000 mortgage, or a massive $3500 for a $500,000 mortgage, doing the hard yards to secure such a deal is really a no-brainer!
So which rate would you prefer? The one you’re currently paying, or the lower rate you’re likely to score if you use these 5 tips to bargain for a better deal?
1. Research the competition/market
A good place to start these days is in the comfort of your own home, in front of the computer. There are numerous online comparison sites or you can go the old fashioned way and pick up the phone. However you choose to do it, arm yourself with a wealth of knowledge and get a handle on the lay of the lending landscape to put yourself in a position of power.
2. Speak to your lender
Ask them outright what sort of better deal they might be able to provide in order to secure you as a consistent, low risk, long-term customer. Don’t be shy when it comes to negotiating waived fees and lower retail rates. If you have a good track record with your lender, rest assured they will work to retain your business.
3. Clean up your credit
Now is the perfect time to get yourself in a better borrowing position. If you have a few tardy payments lurking around your credit file, or excessive credit card limits that you don’t really need, think about cleaning up your act and using the lower interest rate reprieve to get back on track.
It might take a couple of years worth of tight cashflow management, but if it means being in a stronger position to negotiate with lenders down the track, then it’s time well spent.
4. Consider taking your business elsewhere
Okay, refinancing and shifting from one lender to another can be a daunting prospect admittedly. But if it means saving thousands, then it’s unquestionably a good tactic.
You might even find that just the threat of losing you to their competition will actually encourage your current lender to feel a little more flexible with your existing loan terms.
5. Talk to a mortgage broker
If taking Lady Gaga’s advice and putting on your p-p-p-poker face in a bid to negotiate a better deal with your bank makes you squirm, then perhaps you could consider bringing in the big guns?
Professional mortgage brokers will identify the best overall loan for your specific needs first, and then negotiate the most suited lender and product. Additionally, we know what the competition is doing and can use our industry insight to get you the best possible deal.
As they say, there’s really no harm in asking is there?