If you don’t ask you don’t get. If you are unhappy with your current home loan it’s perfectly acceptable to approach your lender and ask for a better rate. Banks and lenders will want to keep your business so in order to remain competitive they should come to the party if what you’re proposing is reasonable.
This is never guaranteed though. If you find that your lender does not want to come to the table then it may be time to consider a different lender altogether. The important thing is to be prepared and arm yourself with as much information on competitor’s loans as possible.
Back in September 2010, a survey by consumer group Choice showed that one-third out of over 2,000 Australians surveyed asked their financial institutions to reduce their rates on their home loans. The results showed:
- Almost 40 percent who convinced their bank to reduce their interest rate received up to 0.25 percentage points off
- A quarter were given between 0.25 and 0.5 percentage points
- A quarter between 0.5 and 1.00 percentage points
- One in 10 received between 1 to 2 percentage points off
However, 41 percent that asked for a discount didn’t get the response they were hoping for and did not receive any discount as a result.
While negotiating with your lender can sometimes work for some people it might not work for everyone. Don’t be disheartened if you met with your bank and they wouldn’t budge as you may be able to find a better deal elsewhere.
If you are not happy with your current lender, switch loans by comparing home loans online, you may be surprised.
If you want to try to negotiate a better deal with your current lender, below are some tips that could help you be better prepared:
- In addition to asking your lender for a reduction on your interest rate, also ask if they can reduce your fees or include some extra features. You won’t know unless you try!
- Spend some time online to compare home loans so that you can see what rates and fees other institutions are advertising. If you find that they are lower than what you getting, take this information to your lender to show them what their competitors are offering.
- Make sure that if you say that you will take your business elsewhere that you mean it, because you may have to do this.
Also be aware that switching loans can be a costly exercise, so make sure you find out all of the fees and charges involved to exit from your existing loan as well as setting up the new one. Then do the calculations and work out if you will save more by making the switch.