The secret to getting a better deal on your home loan is simple. It boils down to transparency and access to options beyond your local bank branch. You need to be able to see what rates are available before you can know which one is right for you.
If you visit your local bank branch, you’ll only see one or two options. If you shop around online, you’ll see dozens. Access to a wider range of choices can translate into huge savings. Based on the average Australian home loan of $371,100, households could save up to $5,412 each year in repayments by negotiating or switching lenders to get the best rate available*.
That equates to a saving of $162,458 over a 30-year loan!
There are a few easy steps you can take to reduce your home loan repayments.
Always get the best deal by comparing lenders. Use an online home loan platform that has all the major banks and other lenders in one place.
While Australia’s big four banks may hold 80% of all residential mortgages, research shows that a new breed of financially savvy borrowers are opting to go with smaller lenders.
Research by Lendi found that 79% of Lendi’s borrowers in a 12 month period chose a lender other than one of the big four banks. The finding comes from analysis of a sample of 2,800+ home loans settled on the Lendi platform.
“We put this down to online borrowers responding to choice and uncovering big savings on their repayments along the way,” says David Hyman, Lendi co-founder and managing director.
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Many Australian lenders are giving borrowers lower rates than advertised. All you need to do is ask for a more competitive rate.
“By negotiating a better interest rate and home loan package, homeowners could save themselves up to $5,500 by this time next year,” says Hyman. “That’s a pretty good incentive to do some research and assess your options.”
“If you don’t have time or want to negotiate directly with your bank, using a Home Loan Specialist is a convenient way to short-circuit the process - just make sure they are looking at loan options available across the whole market,” adds Hyman.
In the current climate, Principal and Interest (P&I) rates are considerably lower than interest only (IO) rates across the board. If you can afford it, consider switching to P&I repayments early, before you interest only period expires. The longer you pay interest only, the higher your repayments will be when you do switch to principal and interest.
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Make sure you’re in a strong position by checking your LVR and credit score. A clean credit file along with an LVR below 80% will put you in a strong position to negotiate a lower rate from your lender.
Your LVR = (Loan amount / Value of property) x 100
For example, if you took out a $300,000 loan for a house worth $400,000, then your LVR would be $300,000 divided by 400,000 which is 75%.
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The days of putting on a suit before asking your bank manager for a better home loan deal are long gone! We live in a world where you can get whatever you want, when you want it, and that should apply to low home loan rates.
Our easy-to-use online platform allows borrowers to complete an application in a matter of minutes. You can even upload your documents online. Most lenders will typically require:
Recent bank statements
Employment info e.g. payslips or tax returns
PAYG statement/Group certificate
Recent statements for your current home loan
Identification such as passport or drivers licence
Plus, once your loan is submitted you can check its status 24/7.
Roll your credit card, car or personal loans into your home loan.
Before you refinance you’ll need to consider the costs of refinancing. You may incur establishment fees and charges or, if you’re in a fixed rate period, break costs. It’s important to make sure you’ll end up gaining from switching home loans.
Consider asking an expert to crunch the numbers for you. Discuss your needs and loan preferences with a Home Loan Specialist and they’ll work out which loan option makes the most financial sense for you. Select a time for one of our Home Loan Specialist to call you.
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*Calculation based on rates from 37 Australian banks and non-bank lenders including the Big Four (as of 28 November 2017). The difference between the most expensive interest rate (5.67%) and cheapest interest rate (3.64%) for the average home loan was then aggregated over the life of a 30-year P&I loan. Average home loan size according to ABS, September 2017.
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