With significant changes in the home loan environment due to the economic pressures of COVID-19 quarantines on the local market and global market contractions, home loan borrowers are being encouraged to check with their lenders whether their interest rates are still in line with the current competitive lending market.
Jess Peletier, head mortgage broker for Perth Broker, said that with lenders showing an appetite to grow their books by luring new customers with sharp pricing and refinance offers you can potentially save by moving or even speaking with your existing lender. “It’s not all about refinancing, in a lot of cases you can still save thousands of dollars in interest and avoid the hassle of refinancing through a quick call to your mortgage broker or bank who setup your loan”. Just as aggressively as lenders like to gain new customers, by reducing the interest rates for their existing loan customers can help reduce runoff and ensure they maintain profitable long term relationships.
So what should you do to see if you can save money on your mortgage? Jess has some tips:
- Call your broker to find the best course of action. Not all lenders will negotiate on pricing for existing customers or may not allow it for certain products so your broker can find out exactly what the best pathway is for you as well as whether you’re getting offered a good deal
- Consider whether the current lender is still right for you. If your current lender can’t come to the table with an offer in line with other offers in the market, it might be time to move on. Your broker can help arrange the application, approval and transfer of your home loan making life easy.
- Don’t just look at interest rates. Whether you’re sticking with your current loan product or looking at other lenders – don’t just fixate on the interest rate but look at the overall costs. Sometimes you might be actually saving money by paying a slightly higher interest rate if you save significantly in fees, or by moving to an annual fee product could receive a significant interest rate deduction. Getting advice from a finance broker can help weigh up those total costs so you can make the right decision.
- Watch out for the ‘hidden costs’ of refinancing. Whilst saving 0.1% on your interest rate may appear to be a great deal, you need to factor in the total costs. That includes discharge fees, setup fees, registration fees and potentially lenders mortgage insurance if you’re over 80% LVR.
With more Australians taking greater responsibility for their financial literacy and their overall home budgetary health – it’s never been a better time to start marking smart money saving moves. This increased affordability has also lead to increase home buyers and builders according to Perth building brokers BuildSearch. With these new home owners entering the market, it’s important more than ever to get on the front foot with saving on your mortgage.
Asking Jess for any last tips for home owners wanting to save on their mortgage, she had some sage advice: “whilst reducing your interest costs is great for cash flow, make sure you put it to good use. If you’ve got the ability to you might want to consider keeping your repayments at their current level so the reduced interest rates help you to pay down your mortgage faster and get debt free”.