Want to get the best possible deal on your home loan? Here’s how you can save money on your mortgage.
Is your home loan interest rate significantly higher than the interest rates available on new home loans? If you’re not getting the best possible deal from your mortgage lender, it could be time to negotiate a better deal.
Find out how to get a discount on your home loan
Bessie: Hello and welcome to Finder TV. I'm Bessie Hassan, money expert at Finder, and today I'm joined by mortgage specialist Lisa Montgomery to discuss the important topic of home loan discounts. Now so many Australians are probably paying too much interest on their home loan, aren't they?
Lisa: Well, it's really likely, Bessie. In fact, believe it or not, I was one of those people. I waited way too long to make the phone call, but once I did, I saved almost half a percent of my home loan interest rate, and to me, that's pretty significant.
Bessie: It sure is Lisa. I did the calculation and saving half a percent off your interest rate could actually pocket you almost $40,000 over the life of your loan.
Lisa: Bessie, that's a lot of money, and it's better off in my pocket or, in this case, in your pocket, than it actually is in the lender's. And here's something I bet you don't know. It's a lot cheaper for the lender to keep you as a customer and give you the discount, than to lose you and go and find a new customer.
Bessie: That's correct Lisa. Can we talk through to the steps?
Lisa: Well the first thing you need to do is to find out what interest rate you're paying, and you need to know if that's competitive or not. Now the way to do that is to take a look at your statement or to go onto your internet banking.
Bessie: Another thing you can do is jump on to the Finder Home Loans page. Check out the interest rate on there to find out if your current rate is competitive. Also, jump on to your lender's website. Find out what they're offering new customers. It's likely to be a lot lower than what they're offering you.
Lisa: And that's a really good thing to do because you need to know what they're going to be offering other people. And so once you've done that, it can help you really frame the conversation.
Bessie: And next up, you really need to gather some important information about yourself.
Lisa: That's right. You need to ask yourself a few key questions. Now the first one you need to ask yourself is, "Have I been making my repayments on time?" That's an important one. "How loyal have I been to this lender? How long have I had my loan with them?" And also if you've got other loans or other products with that lender, that's all going to help you frame the words to get a better deal.
Bessie: And also don't be afraid to pick up the phone and call a few other lenders. Find out what they're willing to offer you and if this is lower than what they are currently advertising.
Lisa: That's exactly right. The more preparation that you can do, the better.
Bessie: So next up is the all-important phone call, Lisa. They're waiting for your call aren't they?
Lisa: They are expecting your call. Most lenders have teams of people in retention that deal with these inquiries each and every day. Now you need to keep the conversation respectful, that's important. They're going to ask you a few key questions and then it's likely that they're going to hang up, Bessie, and call you back. That's just a standard thing that they do, because what they're doing is they're assessing how much discount they're going to offer you.
Bessie: Yeah, and if not a discount, a conversion to another product.
Lisa: And if you're happy with that discount, they may actually ask you to pay a conversion or a discount fee. Now if you've been a loyal customer, you really need to negotiate that out. You shouldn't be paying a fee to get this better deal.
Bessie: So Lisa, if a discount is granted, how soon until that takes effect?
Lisa: Well, once you sign the paperwork, it can be almost immediate. It could be the next month. So it's pretty quick.
Bessie: And so worth making that call then.
Lisa: Believe me, for me it was and for you it will be, too.
Bessie: Thank you, Lisa, for your time and thank you for watching Finder TV. Head straight to our Home Loans page at finder.com.au.
Why you need to ask for a discount
If you’ve been paying off your home loan for a couple of years or more, there’s a very real chance that your mortgage is more expensive than it should be. Luckily, it’s easy to negotiate with your lender to secure a discounted interest rate and save thousands of dollars over the life of your home loan.
Most Australians put off asking for a better interest rate because they’re either worried about having an uncomfortable conversation or because they’re simply unaware they have the right to do so. But what you may not realise is that it’s a lot cheaper for the lender to keep you as a customer and give you an interest rate discount, than it is to lose you and go and find a new customer.
So you really do have everything to gain by phoning your lender and asking for a better interest rate – you could save thousands of dollars.
Negotiating a discount on your home loan
Here’s how you can get a better deal on your home loan.
- Find out your interest rate. Look at your home loan statement or go onto Internet banking to check your current interest rate. You can then find out whether that rate is competitive or not by visiting our home loans comparison guide. It’s also a good idea to jump onto your lender’s website and find out what they’re offering new customers – it will most likely be a lot better than the interest rate they’re offering you.
- Gather information. Have you been making your repayments on time? How long have you been with your bank? Do you have other loans or other products with the lender? Loyal and reliable customers have more bargaining power when they ask for a discount.
- Call other lenders. Don’t be afraid to pick up the phone and contact a few other lenders. Find out what they’re willing to offer you and whether they can save you money.
- Make the call. When you’re ready, phone your lender and try to negotiate a better deal. Most lenders have teams of people that deal with these enquiries every day.
- Wait. Most lenders will arrange to call you back later. This allows them to assess how much of a discount they’re going to offer you, or perhaps work out whether you could be suited to converting to another product.
- Start saving. If a discount is granted, once you sign the paperwork it’ll usually take effect immediately, so you could start saving money on your next monthly repayment.
The pros and cons of getting a discount vs refinancing
- There's no need to fill out the paperwork for a new loan
- You don't have to pay exit fees for the old loan and upfront fees for the new loan
- It's quicker than refinancing
- You can't get access to new loan features
- If your lender has bad customer service, getting a discount still won't solve this