How to negotiate a better deal on your home loan

Whether you have an existing loan or you're thinking of refinancing, why not negotiate with your current lender?

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negotiate with your current lenderThe Australian home loan market is highly competitive, which means that lenders may be willing to offer you discounted rates and favourable terms if you're able to negotiate.

As a customer, this means you have increased negotiating power to reason with your lender to get better terms for your mortgage.

Here's some advice about how you can negotiate with your lender.

Do your research

Researching the local property market gives you an upper hand when it comes to negotiating with your lender. Get to know the property market by speaking to local mortgage brokers and viewing similar property listings in the area so you have an idea of what your property is worth.

Learn more about what drives property price growth, such as access to public transport hubs or proximity to public amenities. Consider the positive aspects of the property such as the structural integrity or kerb appeal so you can build a case about the selling points (and value) of your asset.

It's also a good idea to take a look around to see what interest rates your bank is currently offering to new customers, as well as the rates that are available from other lenders. Not only will this help you work out if you’re getting a good deal, but it will also strengthen your argument when it comes time to talk to your bank.

Look at the table at the bottom of the page to get an idea of the current rates, or view more in our home loan comparison guide.

Find out what you can afford to borrow

Your budget is the amount of money that you can afford to make towards each periodic repayment. Most people have a bottom line (the lowest amount possible) and a ceiling (the highest amount they are willing to dish out) when it comes to home loan amounts. Work closely with an accountant and a mortgage broker to help you estimate how much you can afford to borrow.

Use our calculator below to get an idea of your borrowing capacity.

Don't be afraid to ask

Whether you want a lower interest rate, minimal ongoing fees or different home loan features, many borrowers don't realise that they can simply negotiate for better terms by striking up a conversation with their current lender.

If you don’t ask for a better rate you won’t receive one, so don’t hesitate to ask for a better deal. You have nothing to lose and everything to gain.

Opting for an interest rate that's even just 0.5% lower than your current rate could lead to significant cost savings for the remainder of your loan term.

For instance, if you took out an average mortgage of $471,000 at an average standard variable rate of 5.35%, and negotiated for a lower rate of 4.85%, you could save approximately $144 each month or $1,700 each year.

This would amount to a staggering saving of $52,000 over the life of your loan.

Prove your worth

One of your best weapons when hunting for a better home loan deal is your reputation as a borrower. If you’ve got proof of a long history of making your loan repayments on time — and even making additional repayments if allowed — you’ll have more power at the negotiating table.

Provide loan statements dating as far back as possible as concrete proof that you are the type of customer any lender would love to have.

How to apply for a home loan and what documents you need

Demonstrate your loyalty

If you’ve been a loyal customer with your bank for several years, don’t be afraid to play on this connection. Why should a new customer be given a better deal than you, someone who has a long relationship with the institution?

Brooke negotiates a better deal

Brooke has spent the past five years paying off a $400,000 home loan on her apartment . When she took out the loan in 2012, it had a variable interest rate of 6.99% p.a.

Currently, Brooke still owes $300,000 and has a remaining loan term of 15 years. Her interest rate is now 5.00% but Brooke knows there are loans with better interest rates available on the market to new borrowers.

Brookes phones her bank to ask for a better deal. At first she receives a non-committal response from the lender, so Brooke calmly provides her reasons for wanting a lower interest rate:

  1. The bank is offering a better deal to new customers. Having done her research, Brooke knows her current bank is offering the same loan with an interest rate of 4.50% p.a.
  2. Other lenders are offering similar loans with lower interest rates. Brooke has compared different home loans on the market to see that other banks are offering much more competitive rates on similar products.
  3. Strong repayment history. She has never missed a home loan repayment and has even made extra repayments towards her debt.
  4. Loyal customer. Brooke has been a customer with the bank for more than 10 years and has a number of other products (credit card, savings account) with the same institution. She doesn’t want to look elsewhere for a better financial solution, but she is willing to switch to another lender if her needs aren’t met.

In response to Brooke’s compelling argument, the lender promises to ‘see what I can do’ and quickly comes back to her with the offer of a 0.50% p.a. reduction in her interest rate. The result is a huge win for Brooke — the reduced interest rate means her monthly repayments will decrease from $2,372.38 to $2,294.98, a saving of more than $75 per month.

Brooke is able to put that extra money into her super account each month as she starts saving for her retirement.

Be ready to switch

Banks would prefer to keep your business rather than entice a new customer, so don’t leave your lender in any doubt about your willingness to switch to a new lender if needed. It’s important that you are prepared to act if your lender won’t come to the party and offer you a better deal, so make sure you make this clear from the start.

Compare home loan interest rates

Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

UBank UHomeLoan Fixed P&IHome 1Y Fixed≥ 20% Deposit

UBank UHomeLoan Fixed
  • App: $0
  • Ongoing: $0 p.a.
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.

HSBC Fixed Rate Home Loan Package P&IHome 2Y Fixed≥ 20% Deposit

HSBC Fixed Rate Home Loan Package
  • App: $0
  • Ongoing: $390 p.a.
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit.Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply. Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit Smart Booster Discount Variable Home Loan
  • App: $0
  • Ongoing: $0 p.a.
Get a low discounted variable rate loan. Requires a 20% deposit. Get your loan processed fast and settle within 30 days.

HSBC Home Value Loan P&IHome≥ 30% Deposit

HSBC Home Value Loan
  • App: $0
  • Ongoing: $0 p.a.
$3,288 refinance cashback offer
This competitive variable rate loan is available for borrowers with 30% deposits. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply. Low Rate Home Loan with Offset P&IHome≥ 40% Deposit Low Rate Home Loan with Offset
  • App: $0
  • Ongoing: $0 p.a.
A competitive rate with no application or ongoing fees. This loan is not available for construction.

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