As the saying goes, you don’t get what you don’t ask for.
… And it applies to home loan interest rates, too.
Because what many homeowners don’t realise is that you have the option to negotiate your interest rate with your lender – helping you save on interest and pay off your loan, sooner. And who wouldn’t want that?
This article will explore how to negotiate a better home loan rate, with 6 insider tips and tactics used by our Finspo brokers (in fact, these tips are so good we called a team meeting to discuss whether we should be sharing them … you can see where we landed). Let’s dive in.
Why should I negotiate my home loan rate, anyway?
Let’s start with the most obvious reason: negotiating your rate can help increase your borrowing power, save on interest and pay off your loan, sooner.
But ok, you might be wondering if there’s any point in negotiating your rate – will the lender even budge?
Well, truth be told, those headline rates you see all over the internet are not necessarily the best rates out there. They often keep the good ones hidden.
The bigger banks, in particular, price many customers individually – often providing bigger discounts for ‘better quality’ or ‘higher value’ customers. And then there’s a thing called ‘mortgage loyalty tax’, where long-term customers end up paying higher interest rates than newer customers.
So, in many cases, it’s absolutely worth not settling for the first rate you get and negotiating – especially if you know there are better rates out there.
Now, let’s talk about how to do it.
6 insider tips to negotiate a better loan
So, you received a less-than-impressive interest rate. What now?
Let’s go through our top 6 tips, ranging from a softer approach through to escalation tactics.
Know your situation
To be prepared to talk with your lender, you first have to know what you’re talking about – right? You’ll want to know the specifics, such as your loan type, your current rate, your loan to value ratio, and how long you’ve been with your lender.
Being well-prepared with this information will give you the confidence to have an informed discussion and show your lender you know what you’re talking about.
Do market research
Research the best rates currently available on the market. Having this knowledge at your fingertips can give you the upper hand in negotiations. It’ll show the lender you’ve done your homework and understand the competitive landscape – which means they might be more inclined to give you a better rate since you know what’s on offer for customers like you.
It’s a good idea to be really specific when asking your current lender to match an offer. For example, “Lender A is offering a rate of X.XX% and Lender B is offering a rate of Y.YY%”
Use cashback offers
A cashback offer is when another lender dangles an enticing carrot (AKA cash-money) to get you to switch to them. So, you can look into the cashback offers that other lenders are offering and use these as leverage in your negotiations.
For example, you could mention that another lender is offering a certain cashback deal and ask your current lender what they can do to match or beat it. This might just nudge your lender into offering a better rate.
Lean on your loyalty
Mortgage loyalty tax can really sting. So why not try to flip things around and make your loyalty work in your favour? If you’ve been a long-term customer, point it out and don’t be shy about asking for a reward for sticking around. Sometimes a lender just needs a nudge – and loyalty is a fair enough reason.
Escalate your query
To be a fierce negotiator, know that you don’t always have to accept the first response your bank gives you (unless you’re happy with it, of course).
But if you’re still not happy, you can escalate your enquiry. In fact, most banks have a dedicated customer ‘retention team’ whose job is to keep you as a customer. If you reach this team, they’re more likely to offer a competitive rate to keep you on side.
Hot tip? You can even request a discharge form to show them that you’re serious about moving your loan elsewhere.
Leverage the power of a mortgage broker
As mortgage brokers (or home loan experts as we like to call them), negotiation is our thing. So if you don’t feel comfortable negotiating on your own, we can step in and help you secure a great deal, while guiding you through the process.
With a broker in your corner, you’ll have someone with the experience and knowledge to get you the best deal possible, and lenders may take you case more seriously if they know a broker is involved.
Chat with a Finspo broker today (it’s free and easy).
The first conversation with your lender
We get it – negotiating can feel a little uncomfortable, especially if it’s your first time working out a better rate with your lender. So, we’ve put together a handy message or script for you to get started. Change or adapt it as you need.
Hey lender,
My name is [NAME], I’ve been a customer of [LENDER] for [NUMBER OF YEARS] years.
I currently have a [TYPE OF LOAN] home loan with you and my rate is [X.XX%]
However, I have noticed some lower rates are available and I am considering refinancing unless you can match the offers I am seeing.
I found these rates on the market:
- X% from [NAME OF LENDER]
- X% from [NAME OF LENDER]
- X% from [NAME OF LENDER]
[NAME OF LENDER] and [NAME OF LENDER] are also offering a $XXXX cashback offer.
As you can see, switching lenders appears to be a better option for me. Unless there is a better rate you can offer me, I am highly considering making the switch.
What if your lender doesn’t come to the party?
It’s usually in your lender’s best interest to keep you on side, so chances are they’ll come back with a better offer.
However, be warned—they might offer a rate that seems better but isn’t as great as it sounds. This is a classic case of comparing apples with oranges, where the deal may look good at first glance but doesn’t actually match up in the long run.
For example, they may present a fixed rate offer to you (when you’re currently on a variable interest rate) or they may offer to switch you to a product with less features (like a simple loan with no offset account). But if those things are not what you’re after, nor comparable to the rates you have already researched, then be prepared to dig your heels heals in and play hard ball.
If you’re still not satisfied with the rate your lender is offering, it might be time to seriously consider refinancing. Switching lenders could give you access to more competitive rates and save you money.
Not sure if refinancing is the right move for you? Check out our article on the benefits of refinancing to get a clearer picture. Oh, and our brokers are always here to help. We can assess your situation and provide expert guidance on the best path forward.
Does confronting your lender make you squirm? Our broker’s have got you
Negotating with a lender isn’t for everyone – but it is for us.
At Finspo, we do more than typical mortgage broker-y things (like sit in a fancy office and crunch numbers). We get to know you and your goals so we can have your back – and that includes getting you the best rate possible.
Meeting with a Finspo home loan expert is as easy as 1, 2, 3 (plus, it’s free).
- Book a chat with a friendly Finspo expert (online, phew!)
- Tell us about yourself and provide any additional info
- We’ll do the heavy lifting and present you with some loan options and a recommendation
