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How to negotiate a lower interest rate on your home loan

By ,| 4 min read

If you feel like your home loan repayments will never come to an end, the key can be as simple as negotiating to get a lower interest rate. It's worth regularly reviewing your home loan to make sure you always have the lowest rate possible.

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In fact, the recent Lendi Home Loan Index found that owner occupiers who refinanced their P&I loans with Lendi in the first three quarters of 2018 were saving an average of $2,190* in interest in the first 12 months.

Read our 5 steps on how you can negotiate a lower interest rate on your home loan.

1. Ask for the same rate new customers get

Don’t be afraid to contact your lender and ask for a better deal. Speak with confidence and ask for the same rate offered to new customers. You may find lenders will be willing to negotiate to retain their customers, provided you are in a strong position with no missed repayments etc.

If you have a good credit history and have been paying off your home loan over the past 10 years with no late repayments, you could be in a strong position to negotiate.

Negotiate the rate with your lender and you may be surprised how quickly they can be persuaded to lower your interest rate.

Find out if you are getting the same rate as new customers here.

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2. Do your research

Before to speaking to your lender about lowering your interest rate, shop around and compare what rates other lenders are offering for your situation. You can find out if there is a better rate available in mintes by using our online home loan platform.

Show your lender that you know there are lower rates available, this can be a great bargaining chip when it comes to asking them to lower your interest rate.

Even so, you should shop around and see what other lenders can offer you. Your lender may be unwilling to budge and you may decide to refinance with someone else. This brings us to the next step.

3. Be prepared to walk

When it comes to negotiating, you should always be prepared to walk away.

If your lender is refusing to buckle and offer you a competitive rate, don't be put off by the process of refinancing.

Nowadays, the process of switching lenders is fairly simple and can be completed in as little as a week in some cases. Hence, if lowering your interest rate is important to you, be ready to change lenders.

4. Play the loyalty card

As already mentioned, use your loyalty as a bargaining chip if you must. Many borrowers stay with the same lender for years, and if you have a good history with them, it can help when it comes to negotiating a lower rate.

Prior to asking for a lower interest rate, review your position and check that you have been making your repayments on time and that your LVR (Loan to Value Ratio has gradually been getting lower.

With this, you now have a current timeline of your loyalty and proof of being a reliable customer. This can be very helpful.

Find out if you have the lowest rate possible here.

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5. Make sure you're the ideal borrower

Be the borrower banks love to lend to and give yourself the best chance of nabbing that low rate. Lenders look for a number of key things before calculating your interest rate.

Lenders want borrowers with:

  • A low LVR - An LVR over 80% may hinder your negotiations.
  • Good credit score
  • No missed repayments or defaults
  • Steady employment

Be aware of the factors that may hinder your negotiations:

  • The type of customer you are e.g. self-employed, investor, non-resident
  • Missed paying repayments
  • Poor credit score
  • If you owe over 80% of the property value

Hopefully, with these 5 steps you are on your way to negotiating a lower interest rate on your home loan.

Got a home loan question? Just ask!

We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here.

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

*$2,190 figure based on Lendi Home Loan Index. Calculated by comparing customers' previous and new interest rates and assuming no interest rate rises and good account conduct. This does not include customers consolidating debt or accessing equity, and does not account for changes to the overall lending amount or total loan term.

Tags: home loan calculator, home loan, interest rate, refinance, low interest

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Important legal stuff
Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 25 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. Lendi Group Pty Ltd, which is the ultimate holding company of the Aussie and Lendi businesses is owned by numerous shareholders including; banks such as CBA, 1835i (ANZ’s external venture capital partner) and Macquarie Bank, the Lendi founders and employees, and a number of Australian institutional investors and sophisticated investors including UniSuper.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria. Top rates include lenders who are on our panel and are then defined by the circumstances provided by the borrower.
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