With official interest rates trending downward, shrewd mortgage holders may take the opportunity to call their lender to ask for a better deal. Consulting mortgage brokers can help to lower your interest rate.
But when even a small interest rate reduction means potential savings of thousands of dollars, is a simple phone call really enough to get you there?
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In 2019, your interest rate should have a three, if not two, in front of it, which is common advice for homeowners considering the competitiveness of their loan settings.
But while a number of lenders offer lower rates to new customers, it’s not always so simple for existing customers to secure the same outcome.
A leading mortgage and finance broker says that if people want a better deal on their mortgage, there are basically two options:
- Call your bank and ask them to match the new rate, or
- Contact your broker and vote with your feet.
Although the first option is commonly recommended, lenders aren’t always so obliging when it comes to rate-matching to get you a more affordable mortgage.
As an existing client, it can be disheartening to see your bank offer new customers a lower rate to the one you currently have.
Lenders regularly try to win new customers by offering low rates. It is a great acquisition strategy.
But if they refuse to match your current rate to this new offer, you can always contact a broker and refinance with a lender who is hungry to win your business.
Mortgage brokers, on average, have access to a panel of 34 lenders, and this creates competition among lenders. Mortgage brokers are also in a position to offer you a more in-depth and customised level of service to lower your interest rate. This can allow them to find their customers a mortgage product that may suit their current needs, wants and circumstances.
How to lower your interest rate?
Lowering your interest rate, especially on a home loan, can save you a significant amount of money over time. There are several practical ways to do this:
Refinancing Your Loan
Refinancing your mortgage means switching your existing loan to a new one, often with a different lender, that offers a lower interest rate. Many lenders compete for borrowers and may offer better deals, especially if your credit profile has improved or market rates have dropped. However, you should always consider fees like exit fees or setup costs to ensure the switch is actually worth it.
Use our mortgage refinance calculator to compare your loan rates before and after refinancing!
Speak to Your Current Lender
Before refinancing, it’s often worth asking your current lender if they can offer you a better rate. If you have a good repayment history or if market rates have fallen, lenders may reduce your rate to keep your business.
Use an Offset Account
An offset account is similar to a regular savings account, but it’s linked to your home loan. The balance in this account is offset against your loan principal, which means you’re only charged interest on the difference. For instance, if your loan is $200,000 and you have $20,000 in your offset account, you’ll only be charged interest on $180,000. An offset account doesn’t lower your actual interest rate, but it reduces the interest you pay, helping you pay off the loan faster.
Make Extra Repayments
Paying more than the minimum reduces your principal faster, which means it reduces the total interest charged over time. Even small additional payments can make a noticeable difference.
Consider a Variable Rate Loan
Variable-rate loans sometimes offer lower initial rates compared to fixed loans. However, they can fluctuate with market conditions, meaning your rate and repayments could increase. This option works best if you’re comfortable with some uncertainty.
Improve Your Credit Profile
A higher credit score signals lower risk to lenders, which can help you qualify for better interest rates. Paying bills on time, reducing debt and avoiding unnecessary credit applications can all help.
Lowering your interest rate helps significantly reduce your home loan finances. Book a consultation with a trusted mortgage broker to get the best interest rates and loan features!
