Everything you need to know about home loan deals
Taking out a mortgage is a massive financial commitment. But you can ease the pain by snaring a special home loan deal.
Many people don’t realise that banks, credit unions, building societies and non-bank lenders frequently offer short-term home loan deals.
Why? It’s because the mortgage market is so competitive, with more than one hundred lenders offering several thousand products. Given how crowded the market is, lenders often feel like the only way they can get people’s attention is to entice them with home loan deals.
To put it another way, some lenders are so hungry to sign on new customers that they will literally buy your business.
All lenders play the game
Some people might assume that only smaller lenders would resort to offering home loan deals.
However, that’s not the case. Even the big four banks – ANZ, Commonwealth Bank, NAB and Westpac – which dominate the mortgage market, feel like they need to play the specials game.
That highlights just how competitive Australia’s home loan industry has become.
There are always home loan deals available, if you know where to look.
Different types of home loan deals
Not all home loan deals are created equal. Of course, some are more generous than others. But they can also be structured very differently.
Here are the five main types of home loan deal:
- Rate cuts
Lenders might try to entice you by offering you a reduced home loan rate. This might be a temporary reduction that is withdrawn after, say, one or two years, or a permanent reduction that applies for the life of the loan.
- Fee reductions
Lenders might also promise to reduce or eliminate certain fees if you sign up for a mortgage. This might save you up to $1,000.
- Cashback offers
Some lenders hand out rebates, which can be worth more than $1,000. Borrowers can use this money to help pay for any establishment fees, valuation fees, settlement fees, legal fees and lenders’ mortgage insurance charges.
- Rewards points
Other lenders hand out credit card rewards points, which can also be worth more than $1,000.
The other popular type of home loan deal is sign-on gifts. These can include EFTPOS cards, iPads, shopping vouchers and even holidays.
Conditions always apply
There are two important points to remember when it comes to home loan deals. First, you don’t get something for nothing, so you might have to ‘pay’ for a lower rate with higher fees, or you might have to ‘pay’ for a free gift with less flexible repayment terms.
Second, conditions always apply for home loan deals. The most common condition is that you have to be a new customer (as opposed to an existing customer moving from one of the lender’s products to another). Other conditions might include:
- Your loan needs to be of a certain value – e.g. more than $300,000 or less than $750,000
- Your loan needs to be of a certain type – e.g. investment
- Your loan needs to have a certain structure – e.g. principal and interest
- Your loan needs to have a certain loan-to-value ratio (LVR) – e.g. no higher than 80 per cent or between 50 and 70 per cent
- Your loan needs to be bundled with other products – e.g. a credit card or savings account
A regular offer can beat a special deal
Anyone who’s planning to take out a mortgage or who is thinking about refinancing should be on the lookout for home loan deals.
However, it would be a mistake to assume that one lender’s special deal must always be better than another lender’s regular offer.
There are a lot of credible lower-profile lenders out there that regularly outperform higher-profile lenders in terms of price and service – even when those rivals have special deals.
So once you’ve explored RateCity’s home loan deals page, you should also visit RateCity’s home loan comparison page. This is a place where you can check out almost 4,000 loans, comparing them in terms of interest rate, fees, features and minimum deposit. You can also take advantage of RateCity’s Real Time Ratings™ tool, which offers a personalised home loan ranking calculated just for you.
Once you’ve done that, you might discover a regular offer that is superior to any of the short-term home loan deals.
Don’t be afraid to ask for a better deal
Borrowers and refinancers shouldn’t just be on the lookout for existing home loan deals – they should also try to manufacture their own.
Many Australians don’t realise that lenders will often hand out spontaneous home loan deals – provided you ask.
Why? It’s because the mortgage market is so competitive. If lenders think you might take your business elsewhere, there’s a chance they’ll sweeten an existing deal by offering you any combination of rate cuts, fee reductions, cashback offers, rewards points and gifts.
Don’t let these lenders pressure you into accepting spontaneous home loan deals on the spot. You should ask for the deal in writing and say you’d like time to discuss it with your family. Alarm bells should ring if the lender insists that this is a now-or-never offer. That could be a sign that the lender expects that you’re going to shop around – and find a superior offer. The lender should have no problem with giving you time if it’s confident about the quality of its offer.
Another point worth mentioning is that you shouldn’t feel embarrassed about asking a lender to give you a better deal. Lenders get asked this question all the time; it might feel strange to you but it’s standard for them. The worst that can happen is that the lender says no.