5 strategies for borrowers gearing up to renegotiate their home loan
By the end of this year, hundreds of thousands of fixed-rate loans will have expired, with mortgagees left to decide how to proceed.
And according to Zippy Financial director and principal broker, Louisa Sanghera, many will not have the option of refinancing due to shifting financial circumstances.
“The rapid increase in interest rates since May last year means many existing borrowers are stuck with their current lenders, because they simply don’t qualify to refinance elsewhere at present,” Ms Sanghera said.
But according to the brokerage, borrowers who are stuck with their existing lender still have some leverage if they know how to negotiate.
Just because they can’t refinance “doesn’t mean that borrowers need to just accept any old ‘offer’ from their lender or – worse still – simply allow their home loans to roll over to the advertised variable rates,” she said.
By being proactive and undertaking some simple research, existing borrowers can secure a better rate, depending on their circumstances. Here are five negotiation tactics Ms Sanghera recommended:
- Find the best rate on offer
Know the best home loan rate out there, from any lender, and use this as leverage. Lenders are putting a lot of attention on retention, and they’ll likely make a competitive offer.
“Find the best rate in the market then take that rate to your bank and ask them to beat it,” Ms Sanghera said.
- Go straight to the retention team
Ms Sanghera said borrowers often make the mistake of talking to the wrong people, assuming that the person who answers the phone is the best placed to help them.
“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 call centre,” she said.
- Be persistent
Too many borrowers fail to take a proactive approach when it comes to negotiating on their loan, according to Ms Sanghera.
“If the rate they offer you is still underwhelming, don’t give up, and repeat the same process every six months,” she said.
- Know your LVR, and make sure your lenders know it too
Going into negotiations with significant equity in a home can work to a borrower’s advantage, as long as they know how to talk the talk.
“Lower loan-to-value ratios, or LVRs, do carry lower rates with lenders. 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,” Ms Sanghera recommended.
- Request a fee waiver
Sometimes banks simply won’t offer a lower rate, but that doesn’t mean a borrower can’t save a bit of money.
According to the broker, a fee waiver is often a way to soften the blow if a lower rate can’t be offered.
“If they say they can’t lower the rate, then ask if they can waive the annual fee instead”.