A Mortgage Review Can Help You Get Lower Interest Rates
Australia is experiencing a weakening housing market and the Reserve Bank has no choice but to further reduce the already low-interest rates.
You may notice that while mortgage rates are nearing all-time lows, you’ll barely see any changes in your home loan rates. As a borrower, it’s your responsibility to do a mortgage review and assess whether you’re taking advantage of the low-interest market rates.
The current mortgage interest rate ranges from 2.5% to 3.2%. With these figures, it seems that now is the chance for some bargain-hunting. If you already have an existing plan, renegotiate for better terms to save more money on loan repayments.
What Can You Do?
When looking for ways to get better interest rates on your mortgage plan, always remember the following tips:
1) Refinance your debt
So long as you’re not locked in a fixed-rate plan, you can refinance your mortgage plan for a fee. The discharge fee may seem costly, but if you compute the long-term effects of shedding a few decimal points off your mortgage interest rate, you’ll still save more for the whole length of the loan term.
2) Compare and compute potential savings
Look around for the best possible rates offered. Aside from interest rates, check the comparison rates, application fees, and term conditions that each bank offers. Compute each scenario to assess whether it’s worth the cost and the hassle to refinance your loan with other banks.
3) Look into lender policies
It’s okay if you don’t meet the criteria of one lender; just look around and you’ll find one that will fit your situation.
Even if you’ve just started a new job and you’re under probation, there are banks that are willing to accept your mortgage refinancing application with very competitive rates.
4) Regularly check interest rates
Retaining the same lender for more than 2 years means you’re paying them too much. Banks take care of loyal borrowers because they can charge higher interest rates without being noticed. Lenders often take advantage of overconfident and complacent borrowers who like to set and forget their mortgage plans.
Make sure you do an annual rate check to let your lender know that you’re always monitoring things. Regularly renegotiate terms to ensure you always get the best rates the bank can provide.
Negotiate any fixed-rate term that’s about to expire. Interest-only and fixed-rate loans are automatically rolled into variable-rate loans when they expire, and you’ll have no chance to negotiate for discounts once it has been set. You’ll have to wait for another year before you can talk with the lender to get better rates.
5) Always check the terms before you sign
With diving interest rates, it’s easy to find competitive offers that may seem too good to be true. Some of them come in the form of fixed-rate loans that provide way lower rates compared to variable loans.
However, these fixed-rate loans may lock you for a certain period and you may miss taking advantage of possibly better variable loan terms by then. Still, it’s possible to end the fixed-rate term and roll it into a variable loan, but for a hefty fee.
Always assess the current market situation and the projected condition in the following years to determine whether it’s better to take the fixed-rate or the variable rate loan.
Don’t be afraid to shop around and find the lowest rate that will fit your criteria. Remember that it’s your money that lenders want, so you have the upper hand when negotiating terms.