A home loan is often the biggest financial commitment you’ll take on in your life, which means there are few excuses to not go in prepared to bargain for the best deal.
While asserting yourself in an intimidating market can be overwhelming, don’t feel as though negotiating is impossible or not worth it; like any other business, the bank wants you to purchase their product, and as a customer, it’s your prerogative to make sure that you get the best value for money.
The best way to arm yourself before negotiating is with information, and whether you’re refinancing, thinking about switching banks, or wanting to get into your first home, here are three key tips to secure the best possible deal.
Position yourself as the ideal borrower
In order to prime yourself for the best deal, you’ll have to prove to the lender that they want your business. One way to do that is to make yourself the ideal borrower, which means saving a big deposit (more than 20 per cent), having a clean financial history and providing evidence that you’ll be able to meet your repayment obligations.
If you haven’t already, get a copy of your credit report and pick it apart. Any missed or defaulted payments will be taken into account when considering your application, and a low score could result in your interest rate being higher or your mortgage denied entirely. At least 30 per cent of Australians have errors on their credit report, so it’s worth checking and getting any errors removed.
Be ready to explain yourself if your banker asks about certain details on both your credit report and bank statements. They will examine these closely, and it’s a good idea to be one step ahead and show you have a strong awareness of your own finances. The bargaining power is then in your court.
Know the market – and the highest rate you’ll accept
It’s worth doing a bit of homework and deciding before you meet with prospective lenders what the maximum rate you’re willing to pay is. That way you’ll be less likely to hesitate to say no to a higher than acceptable rate on the day.
With over 2000 different mortgages on offer in Australia, it’s best to compare interest rates across the board and get a broad view of the market. Remember, every percentage point counts – a 0.25% reduction on a $600,000 mortgage could save you around $25,000 over 25 years. Be wary of both up-front and ongoing fees, and take them into account when calculating the best current rate.
Go in with a competitor’s offer
If your favourite prospective lender is unwilling to budge on a rate offer, show them evidence on a well-priced competitor offer. If they really want to score your business, they may offer to match or beat it.
The more knowledge you can show about their offering and their competitors’ offerings, the better your chances are. If you’re shifting providers or taking out a mortgage for the first time, look at the establishment fee – banks are surprisingly flexible with up-front costs, and you may be able to get this waived, particularly if you shift your everyday banking and savings accounts along with your mortgage.