You’re loyal to your home loan lender. But are they loyal to you?
It can be too easy to stay loyal to your home loan and lender. Renegotiating a loan is a time consuming process that soaks up your time energy. Most people understandably want to avoid the stress and costs of moving lenders. But know this, your lender has little incentive to be loyal to you. It’s not in their interest to keep updating your loan with the favourable terms they’re offering to new customers.
Take a recent example from our clients Thomas and Bianca who had their home loan with CBA. The couple were reasonably happy with their lender, but over the last 18 months their home loan had gradually become less and less competitive. Their current rate was 3.97% however by moving them to ANZ at a lower interest rate of 3.35%, they were able to save $13,564 in the first year and approx. $65,000 over a 5-year period.
As interest rates have moved around and are now at record lows (RBA rate is at 0.75%), have you checked if your lender has passed on all or part of the interest rate cuts to you?
Lenders typically do not tend to pass on all of the cuts to existing clients and that can put you at a significant disadvantage. Your loan is likely to be less competitive than the loan your lender would give to a new customer who walks in off the street. You or your broker needs to negotiate with your lender to make sure you’re getting a similar deal to a new client.
There are a number of variables to look at when working out if your loan is competitive.
You need to compare:
- Interest rates. Compare rates (fixed and variable) between lenders. Also, if you have fixed your interest rate, make sure you renegotiate the rate on expiry. A fixed rate may automatically roll over into the standard variable rate which can be very uncompetitive
- The fees and charges of various loans.
- Discounts and rebates offered by lenders if you take up a product bundle.
- Whether an offset account is included. This is a great way to save on non-deductible interest costs).
- Whether the loan offers the ability to redraw.
- The lender’s online presence. Do you want to be able to run your expenses easily so you can manage your budget? In that case, a lender with a strong online presence can be an important consideration.
- Customer service. Is face-to-face customer service important to you or do you prefer to do everything by mail and phone?
- Lending policies. Different lenders have different lending policies. If you focus purely on the interest rate when looking at whether your home loan is competitive, you may miss out on the home loan all together. The rate may be slightly higher via a different lender but their policy may better suit your personal circumstances (e.g. a good maternity policy or a policy that counts bonuses towards the ability to service the loan).
To get the best discount, you’ll probably need to go through the process of leaving your lender. That’s a fairly big undertaking on your own.
Firstly, you need to do your research to prepare yourself for the negotiation. you’ll need to investigate other lenders who have better rates and also review the features of their loans. You then need to work out if you’ll be eligible for these other types of home loans — this may involve calling the lender to discuss. If you’re not eligible for other loans, you might not be in a strong negotiating position as it will be difficult to move lenders.
When you’ve finished your research, you’ll need to call your lender to explain that you’re going to refinance your loan to another lender offering a better deal. You’ll be put through to the retention team who may be able to offer you a rate reduction or another incentive to stay.
There’s no guarantee that you’ll get a better deal. Factors such as your repayment history or the amount you’ve borrowed against your property can influence whether they will agree or not.
As experienced mortgage brokers, we can do the majority of the research and renegotiation process on your behalf. Our job as mortgage brokers is to make sure you’re getting the best home loan deal for your personal circumstances and financial goals.
To do this, we’ll go through our review process. This involves looking at your current home loan, reviewing your situation and what may have changed in your life. Maybe you’re looking to renovate your home, buy a new home or consolidate all your debts.
Once we understand your current situation and need for future finance, we can renegotiate your loan with your current lender or assess your ability to refinance with another lender. . The goal is to make sure not only that your rate is competitive but also that the features of the loan suit your needs. We can then work with you to assess the interest savings, benefits and time involved in switching lenders versus staying with your current lender. new lender
With the holiday period upon us, now can be a great time to review your financial situation to ensure you’re getting the best deal for your home loan. Call the team at Orium Finance on 02 8330 3700 for a complimentary review of your mortgage facilities or to arrange a meeting with one of our experienced mortgage brokers.
Speak to our team today to see how you can achieve your financial goals.
One of our mortgage brokers will contact you to discuss the following:
- Get to know your financial objectives
- Help you to understand your borrowing capacity
- Take you through how we can assist you with your finances
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