Meredith Williams
4th July 2022
It’s always a great feeling to get your finances sorted out when you buy a home or investment property.
But that doesn’t mean you should sit back and completely forget about your mortgage, because the home loan market and your financial circumstances can change. Even if you felt that you got the best possible deal when you took out your loan, there might now be something better on offer now.
You may be asking, are there savings to be made by taking action?
If you’re looking for savings on your loan by refinancing or renegotiating a quick first step is to know where your loan is sitting today.
We have a free tool called loanScore that checks how good your rate is and tells you if you could be saving money.
It takes two minutes and it can help you better understand where you stand and can help you have conversations with your mortgage broker about refinancing or renegotiating your loan.
You might also end up changing the type of loan you have, known as restructuring.
Either way, here is what you need to know about getting a better deal on your home loan.
Refinancing
In refinancing, you take your loan to a new lender to get a better deal.
Lenders will often offer lower interest rates to attract new customers than they will to keep their existing customers.
For instance, you might be paying an interest rate of 3.19% on your current loan and by switching lenders you could drop that to 2.19%.
UNO mortgage advisor Jay Ahluwalia calculates that with such an interest rate reduction for a $500,000 mortgage with 25 years to run, monthly repayments would drop from $2,421 to $2,166 – a saving of $255 a month.
“At this time when we’re looking to increase cash flow, and minimise debt it’s a good opportunity to really sit back and think about our finances and look at where we’re going,” Jay says.
Before you refinance your loan, get yourself ready by working out your monthly expenses. This is easy now with digital banking offering easy ways to categorise your spending.
Renegotiating
As a general rule you can get a better deal for your mortgage if you refinance to a new lender who is keen to have your business. This also relies on you meeting the requirements of the new lender.
Switching requires going through the mortgage approval process with the new lender, and providing updated paperwork. It also means completing an updated valuation on your property, which may have fallen since the coronavirus crisis commenced. If you are otherwise happy with your current lender and the features of your loan, there is an alternative to refinancing.
The good news is you may be able to drive a better deal from your current lender by renegotiating, that is, by asking your lender for a better interest rate.
“Generally, we find if you’ve had the loan for a number of years, the current offering by your bank is probably going to be a little bit better than what you’re paying,” says Jay.
For instance, if you have a $575,000 mortgage at 3.79% for 27 years with your current lender, they might drop your rate to 2.9%, which would reduce your monthly repayments from $2,838 to $2,561.
Before you go to your lender, it’s important that you know what sort of deals other lenders in the marketplace are offering, so you can ensure your bank is offering you a good deal. Your mortgage broker can advise on this because they know what different lenders are offering to different borrowers.
Refinancing and renegotiating often go hand-in-hand with a restructure, because you might discover that you will do better by changing your loan type as well as your lender or your interest rate. It’s another worthwhile conversation to have with your mortgage broker.
Checking your loanScore is a great first step to see how good your rate is, and our team of expert brokers are here to help you take steps to refinance or renegotiate.
It takes two minutes, and it’s free.
