Is your home loan interest rate too high?
Does it feel like everywhere you look you see home loan rates lower than yours?
Does everyone seem to have cracking deals except you?
Is this a selective observation or just cold hard truth?
Interest rates can hurt.
Take a classic barbeque-finance conversation. Usually someone feels hard done by because it is very unlikely everyone involved in the interest rate discussion is on the same rate.
I have shared how I have previously saved my clients over $300,000.
I just asked the lender if they still value their customer.
You don’t ask. You don’t get.
It is not out of the question for one phone call to save a borrower thousands, even tens of thousands of dollars, in home loan interest.
Many borrowers could have their home loan interest rates lowered just by asking—no need to refinance. No applications. Just a sporting gesture by lender that does not want to lose a customer.
What if you got a discounted interest rate?
Asking your lender for a better rate can result in real money saved.
Have a look at what a 0.50% discount can do for a borrower currently on 7.00% with a $600,000 still owing and 25 years to run on their loan term.
A rate move, from 7.00% to 6.50%, could see repayments drop by $189 per month.
Don’t underestimate the many financial impacts a lower interest rate could have.
The first month after the rate cut could see $250 in interest saved—becoming $6,002 over two years.
Impact of a 0.50% rate reduction
$189/mth reduction in minimum repayment
$250 interest saving month 1
$2,751 interest saving year 1
$6,002 interest saving Year 2
And so on and so on….
Remember banks are banks – they are good at making money. This is about them making less money off you.
Read my article on how to pay off your mortgage faster where I share examples of some home loan repayment hacks.
Remember
This article is for those happy with their home loan product – just miffed with the current rate and want it reduced.
If your home loan product is no longer meeting your goals or objectives it might be worth engaging a broker to assist.
INSIDER GUIDE: How to ask your lender for a better rate
In my home loan experience, I have seen a two-phase approach to asking your lender for a better rate be most successful.
PHASE 1 – Does your borrower profile stack up?
Certain borrowers and scenarios have a better chance of a rate reduction that others. If you fit the below profile, consider yourself in the box seat to help yourself – to some savings hopefully!
****BORROWER PROFILE CHECKLIST – 5mins****
You are happy with your product, but notice lower rates being offered to new borrowers.
Borrower lives in the home this loan was arranged for.
You are keeping up your end of the deal. Repayment conduct is good – you are not behind on payments.
Property equity could be considered your skin in the game.
- You contributed a good deposit. 10% can be considered good (20%+ is better).
- You used a guarantor. Family might have helped by using their property.
- Value of property has increased.
Principal and Interest repayments are the repayment type more likely to receive discounts for owner-occupiers.
There are two main types of home loan product categories: variable home loans and fixed home loans. A variable home loans means the home loan interest rate can change.
If all six boxes are checked then my mortgage broking experience suggests you are in a good position to ask for a discount.
If you do not fit the ideal profile, it does not mean you should not be valued. There might still be options for you to improve your home loan interest rate by contacting your lender. Given the complexity that can be involved in home loans it might pay to speak to a licensed mortgage broker about your options.
So, if you have a variable home loan for the home you live in and are paying off principal, read on….
PHASE 2 – Asking your lender for a better rate
Time to see if you can make some savings on your current product.
DID YOU GET A RESULT?
Yes? You got a better rate?
Woohoo! You are ahead of where you were yesterday.
If you succeeded in getting a discount confirm the following:
- It is for the same product? No changes to anything except rate?
Everything else should be the same: loan term, loan limit, repayment type, account number, same linked accounts (like offsets) if applicable.
- Confirm fees or no fees – These are increasingly rare so ask for any fees to be waived.
You should weigh up the pros and cons of any fees versus discounts.
Before you decide how to spend your savings have a look my repayment hacks to pay off a mortgage faster.
Spread the word – let’s all save together. Pass this onto someone else. What a gift. Saving real (but seemingly invisible at times) money – better than buying someone a losing lotto ticket!
No? No good reason offered?
If you feel you are not being valued, then it is time to take it up a notch. You can do this even if you have a preliminary discount offer.
Time to go on the offensive and ask to speak to the lender’s retention team.
You can still contact a licensed mortgage broker to make sure you explore all your options.
Final word
There are many upsides to asking your lender for a better rate. You might get a better rate or get on step closer to one.
If the lender does not value you as you think they should, remember, you are further advanced than before the attempt.
Find out why. We have touched on the reasons and there are many. Often it is a lack of motivation for the lender to keep your business.
You can always have your situation reviewed. Speak to a broker to assess your home loan options in the wider market