How do I negotiate the best rate?
Everything is negotiable
Banks publish rates with a sense of permanence and authority: “Our Standard Variable Rate is X per cent”. And it is, that is true. But there is also a Discount Variable Rate! That’s what they tempt you with when you say you’ve found a better deal and are moving your mortgage elsewhere. And you may be eligible for other rates too – even as a first-time borrower.
Look good on paper
There are lots of reasons a bank will or won’t lend you money, beyond the actual transaction. For example, a bank may take on someone with limited credit history, or a small budget, who they think will turn into a good customer in the future. That’s why they offer good rates to newly qualified doctors, lawyers and engineers, among others.
Can you make yourself look good on paper? Do lenders offer good deals to members of your professional or trade organisation – it’s worth making a few calls to find out.
Be their friend
Do you work for the bank? Does a close relative? Investigate what conditions apply for staff loans. If you qualify then you may be onto a good deal – if not a lower rate, then other concessions like lower fees or not requiring mortgage insurance.
Are you a long-standing customer? They risk losing all your business if you take your mortgage elsewhere, so be willing to go.
Get a broker
A broker – like Rob McDougall at LoanMarket, Townsville – has all the lenders’ rates at their fingertips. Rob knows how to present you as an attractive customer to the lender and he does the haggling every day. A good broker will save you a lot of leg work.
Shop around to know the market
Before you complain about your rate, make sure that you can achieve a better deal elsewhere. The banks know what their competitors charge and will call your bluff if you tell them you got a ludicrous rate. This is where your broker is invaluable – because they can send you a list, saving you a lot of research. They can also access broker-only rates and loans. However, look at the non-bank lenders too – occasionally they offer better deals than even a broker can get, just to get more clients.
Look beyond the rate
It’s important to consider elements other than the interest rate when looking at the cost of the loan. Some lenders have low rates and high fees. Some lenders insist on mortgage insurance at a lower loan-to-equity ratio than others – so it may be better to pay a higher interest rate and avoid paying mortgage insurance. Some lenders offer a super-low introductory rate, but jack it up to the Standard Variable after the first year. Others may offer a less attractive fixed rate at the beginning, but maintain it for longer.
Above all, be assertive
Your money doesn’t have the bank’s name on it, so stand-up for yourself if you think you’re paying too much. Do your research, see if there are better deals out there then ring your lender and ask for a lower rate. If they don’t, be willing to move.