Anyone with a mortgage has felt the sharp pain of 10 consecutive interest rate rises.
It’s been a double-edged sword coming at the same time as soaring inflation has added an extra $20 or more to that supermarket trolley.
The Reserve Bank of Australia hiked interest rates by another 25 basis points in March taking the official rate to 3.6%.
It pushed many home loan rates toward the region of 7%, squeezing household budgets around the country ever tighter.
No-one wants to give up their lifestyle and for some, it’s become a matter of paying the bills and putting food on the table.
Everyone is looking for relief but how do you get it?
Your two most obvious choices are repricing or refinancing.
Repricing your home loan
Repricing, put simply, is when you ask your current lender to reduce your interest rate.
Firstly, the bank is going to have to see you as a good risk or “worthy” of a better rate so it’s important to ask yourself the following questions:
- Do you always make repayments on time?
- Do you have a good credit history?
- Is your LVR (loan-to-value ratio) 80% or less?
- Are you an owner-occupier?
- Are you in full-time employment?
- Are you making principal and interest repayments?
If the answer to all or most of these questions is YES, you’re still in the game.
Refinancing is a move you can make to lock in a better deal for your mortgage.
It could prompt a move to a new lender or you may wish to stay with your current one, and you may want to switch from a variable loan to a fixed loan or vice versa.
Refinancing is often a prudent tactic and can save you literally thousands of dollars a year.
It can also significantly shorten the length of your loan.
But it may come with an initial outlay as you pay a raft of exit fees and new loan set-up costs.
It’s also possible you may not necessarily wish to leave your current lender and go through the hassle of switching loans.
Do your research
Before you make the call, do your research and talk to an expert, such as an experienced mortgage broker.
Information is king!
- Know what rate you are paying and what rate the bank currently has available
- Find out what rate the bank is offering to new customers and try asking for that
- Explore what rates are available at rival banks
When looking at rates offered by rival banks, it is important to compare a similar package or at least one which you are able to take up.
Look at the “comparison rate” which takes into account all fees and charges.
It’s no good switching to a cheaper rate elsewhere, only to be hit by more expensive ongoing fees.
Finally, once you are armed with all of that information, be prepared to play the loyalty card if you can.
If you are a long-time customer of the bank or have other loans or accounts with them, either personally or within your family, they may not want to lose your business.
Remind them that your repayment record is exemplary.
Ask them for the lower rate that new customers pay and if that fails, point out the best rate at a rival bank that you are considering.
If you try and fail to negotiate a cheaper rate, don’t be too disappointed.
The reality is that while it’s wise to ask, most mortgagees are rarely successful.
But there is a much smarter way to get a better deal from your lender
Use a mortgage broker
The best way to get a better deal from your lender is to engage an experienced mortgage broker.
Negotiating and refinancing loans is what mortgage brokers do for a living.
Whether it is refinancing or repricing, your mortgage broker will help determine the based strategy for your circumstances.
Mortgage brokers negotiate with banks and other lenders for hundreds of mortgages every year.
And because of their experience, they have a much higher success rate at securing the very best loans with the cheapest rates.
Find out your next mortgage move
Calder Finance Broking are specialists in the mortgage broking business.
More often than not, we achieve an better deal for our clients who usually benefit from an interest rate cut of 0.5%.
Sometimes that relief is as high as 1%!
Unfortunately, many people do not appreciate just how much an experienced broker can assist them with their mortgage.
At Calder Finance, we can advise you on the most prudent mortgage strategies for your circumstances and ensure you are taking advantage of the very best loan deal on the market.
We pride ourselves on leading our clients into the future with structure, financial stability and confidence.
Contact us today to discuss all of your financial needs and concerns.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.
Written by Hayley Walsh from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.