Interest rates are at record lows and further rate cuts by the Reserve Bank of Australia are predicted this year, it is a good time to review the competitiveness of your home loan rate, and also know how to negotiate better rates with banks and credit providers knowing all your options including working outside of banks for consolidating debt and knowing what things to look out for.
Here are Anthony Bells tips for securing a better deal on your home loan:
– Call your lender and ask for a better deal: It might surprise you how easy it can be to get a better rate with your current bank by simply asking the question. At worst, the best rate they can offer will give you a benchmark to use when looking at other options in the market.
– Look at fixed rates: Fixed-rate loans may offer a better rate than the current variable rates available. Fixed-rate loan periods are generally offered for terms of 1-5 years.
– Speak with a broker: A broker will be able to negotiate with your current lender on your behalf, as well as provide information on which lenders currently have the best offers. Brokers also have direct access to pricing teams at the bank to request interest rate discounts beyond the rates advertised.
– Submit a loan discharge request: When a lender receives a loan discharge request form it will trigger a call from their retention team who are armed with further discretions and offers designed to retain you as a customer. By submitting the loan discharge form there is no obligation to proceed with the discharge, however, check with your lender as they may charge a fee (generally around $300-$350) to process the discharge request.
Things you need to look out for when looking to negotiate a better rate:
– Be aware of fixed rate break costs: If you intend to refinance or payout your home loan within the fixed-rate loan term you could be up for substantial early break fees.
– Fixing in a falling rate market: While you may be able to lock in certainty of repayment and a good interest rate with a fixed-rate loan, it is important to remember that variable rates could drop below your fixed interest rate.
– Check to make sure you meet lender credit criteria and terms & conditions: Many lenders throw out cheap “bait” rates designed to attract borrowers, however the criteria for these exceptional rates may be very specific. A good broker or credit adviser will be able to assist you in making sure you are comparing rates for products you actually qualify for.
– Check online reviews: Some lenders offer good rates to new customers to get them in, only to raise interest rates for existing customers.
If you have personal debts such as credit cards, store finance, personal loans and car loans you may also want to look at consolidating these into one lower monthly repayment.
Some home loan lenders are better and more flexible with debt consolidation loans than others, so it is important to go with a lender who best suits your circumstances – including the type and size of the debts you are looking to refinance, as well as the past conduct on those accounts.
A debt consolidation personal loan could be an option, however, these are usually limited in size (even at the higher end, personal loans are usually capped at between $25,000 and $50,000). Personal loan rates are also generally higher than home loan and car loan rates, but lower than higher credit card interest rates.
It is also very important when consolidating debts to make sure you close or reduce the limits on the accounts you are refinancing. It can cause bigger problems in the future if you refinance your current debt only to continue to use the accounts you have paid down – In many cases, a further debt consolidation loan may not be possible.
Please note: that the above article is provided as general advice, and should not be relied upon without first consulting your own financial services advisor, to ensure the best course of action is taken to meet your own circumstances. Should you require some more specific advice, please contact www.bellpartners.com.
