5 strategies for a successful remortgage

The Reserve Bank od Australia’s (RBA) recent decision to up the cash rate yet again to 4.35 per cent has spurred many mortgage holders to rethink their repayment strategy, from downsizing, to switching lenders, to refinancing with their current lender.

As fixed-rate periods begin to come to a close, the next few months may witness mortgage holders assessing their home loan and deciding on their next move. And, according to research by Finder, refinancing might be one way to reduce mortgage stress and make debt more manageable.

According to Finder data, rates of respondents who were stressed about their mortgage dropped after refinancing, from 60 per cent beforehand to just 49 per cent afterwards.

With the average variable rate dropping from 5.01 per cent to 4.78 per cent after refinancing, the data also indicates that negotiations can have a meaningful impact on interest rates.

But with refinancing to a different lender off the cards for many, internal renegotiation may be the best bet for Aussie loan holders.

Recently, Domain shared five top tips to help refinancers ensure that their conversations with their lender end in success.

1. Be an active borrower

According to Domain, too many borrowers are passive regarding their home loans. Instead, borrowers should be proactive about bettering their financial position.

“A reduction of even half a per cent can be the difference of thousands of dollars a year, which is better off in your pocket than as more profit for the banks,” said Finder’s head of consumer research, Graham Cooke.

Instead of allowing fixed home loans to roll over to the lender’s advertised variable rate once the period expires, it could be well worth negotiating for a better deal.

2. Speak like an expert

The first step in a successful renegotiation is getting hold of the right people.

Instead of speaking to the first person who picks up the phone, Zippy Financial director Louisa Sanghera advised borrowers to ask to be transferred to the retention team.

“Always ask for the bank’s retention team directly as they have the best rates, rather than someone who may just be in the home loan centre,” Ms Sanghera recommended.

Once you have gotten the retention team on the line, Ms Sanghera advised borrowers to levy their knowledge of the market.

“Know the market rates well and take that to your lender and ask them to bear it,” she suggested.

3. Tout your LVR

For many buyers whose fixed-rate interest periods are coming to an end, the RBA’s rapid cash rate increases since May 2022 mean they do not qualify to refinance to a different bank – but this doesn’t mean they have no advantages.

If the value of a property has shot up in recent years, this may well qualify a borrower for a lower rate.

“Lower loan-to-value ratios, or LVRs, carry lower rates with lenders,” explained Ms Sanghera. “So, if your property has gone up in value, you may qualify for a cheaper rate, so make sure you know your current LVR before calling,” she said.

4. Don’t give up the first time

Just because one phone call ends in disappointment doesn’t mean that renegotiating is out of the question.

“If the rate you’re being offered is underwhelming, repeat the same process every few months,” advised Domain.

One unsuccessful phone call might be a catalyst to switch negotiation strategies. If asking a lender to beat the market rate did not work, perhaps the next time a borrower could find out the bank’s rate for new customers and ask for this same rate to be extended to them.

5. Ask for a waiver

Even if every conversation ends with refusal, Domain reminded borrowers that there are other ways to save.

“If a lender can’t lower the rate, ask if they can waive the annual fee this year for you instead,” recommended Domain.

With the cost of living sky-high, every saving counts.