How InfoChoice and 2 phone calls can save you $3K
I’m a little obsessed with scoring a better deal,” wrote Sophie, “So the new year has prompted me to spring clean my finances and review my home loan.”
Banks and other mortgage lenders like customers who don’t review their loans and finances and accept the deal they are given. Sophie’s lender, like many others in 2016, had increased its variable home loan interest rates out-of-cycle with the Reserve Bank.
The Reserve Bank has not increased interest rates for over two years, so if your lender has put up your loan rate, it might be time for you, like Sophie to take action and look for a better deal.
Sophie’s lender had jacked up her owner-occupied home loan rate to 4.07 per cent. A quick scan of Infochoice’s variable rate home loan comparison tables for owner-occupiers shows the lowest comparison rate in the market now is 3.49 per cent.
“I could see,” wrote Sophie, ”for my loan size I could get a better deal of about 3.74 per cent (without an offset account).”
Sophie has more than 20 per cent equity in her home, meaning if she did decide to refinance she wouldn’t have to pay again for lender’s mortgage insurance. She rang that lender offering 3.74 per cent and confirmed that she could get that rate with no fees if she did decide to switch.
Now Sophie was armed with enough information to threaten to leave her own bank if they didn’t give her a better rate.
How to haggle with your lender for a better home loan rate
Sophie explains how she haggled with her bank for a better home loan rate:
1) Armed with information about her own loan rate and a great deal from a competing lender, she rang her own bank.
2) She asked to be put through to the “retention team.”
3) The retention team member quizzed her about her loan, asked what she liked about it and tried to get her to fix her rate and lock in for a set number of years.
4) Sophie did not agree to that and threatened to leave if they didn’t give her a better variable rate.
5) She was put on hold and then told she could get a five basis point (0.05 percentage points) rate cut right there and then, on the spot.
Sophie’s new rate would fall to 4.02 per cent. On her mortgage in Melbourne this will save her $9 per month in interest and more than $3000 over the remaining life of the home loan.
Sophie has saved that money, not by refinancing, but by comparing home loans and making two phone calls.
“I may not end up refinancing just yet,” said Sophie, “but getting a better rate by just asking is a good place to start.”
You can compare home loans from all of Australia’s significant mortgage lenders here.