Following the royal commission into banking and the financial sector, one aspect we have noticed is that people are generally more aware of the home loan interest rate they are paying.
It is of no surprise that new clients are often interested to understand how their current loan compares with the market in general. And whether it is worth looking at refinancing their home loan to another lender.
If you aren’t quite across what is involved in refinancing you can read our other blog here: What is involved in Refinancing My Home Loan
If you are interested in seeing how your current mortgage interest rates compared to other current offers in the market, or maybe the type of loan, features, and benefits are no longer properly aligned to your goals, it might be time to do some research and get an understanding of what is available to you.
The following are five simple steps you can follow to put yourself in the driver’s seat to be able to make an educated decision as to whether refinancing your home loan is the right decision.
What should you do?
There are a few things that all borrowers should be doing to ensure they are receiving a competitive rate. I say competitive deliberately. Having the ‘lowest rate’ should not be the absolute goal as sometimes this can be counterproductive to your longer-term ambitions.
What is essential is ensuring that your loan (home and commercial finance) interest rates remain competitive against other comparable products, at other lenders and the loan you have continues to support your needs and objectives.
Find out what rate you are paying
It is amazing how many borrowers do not know what rate they are currently being charged by their current lender. Too often we find clients who thought they were on a good rate, only to realize that they are paying higher interest than they originally expected. Remember, the interest is better off in your pocket, or reducing the balance of your loan.
Understand what loan is right for your goals
The reasons for getting a home or investment loan vary, so to do your goals. For example, typically for the mortgage against the home you live in, you want to pay this off as quickly, whereas your goal for the mortgage against your investment property might be to maximize taxation benefits available.
These two scenarios have different goals and therefore different loans that will help to meet those goals. Before reviewing other lenders and their interest rates you should first understand the follow about your finance facilities:
- Interest rate should be fixed or variable?
- Should the loan payments include principal and interest or interest-only?
- Is the loan for the home you live in or for investment purposes?
- What is your current remaining loan term?
- Estimated loan to value ratio (LVR)?
- Any features should you have (eg: offset account, redraw, etc) that will support your goals?
Once you have these written down, these will act as the filters you will use when reviewing other lender interest rates.
Review what interest rates other lenders are offering.
Once you know the rate you are paying and the type of loan you have or need, it is best to have a look at what other lenders are offering. By taking the time to understand what a competitive rate is for your type of loan, you will then be better equipped to have a meaningful conversation with your current lender which leads us to my next step.
Ask your current lender for an interest rate review
It never hurts to ask the question. Often your lender will reduce your interest rate, but you have to ask. You can use your research of interest rates as a baseline for the interest rate that you request your mortgage to be discounted to. Lenders realize that it is more cost-effective to retain an existing client than try and win a new one. This is why they have a whole team that tries to entice you to say if you ever advise them you are refinancing your home loan elsewhere. Quite often this simple step can save you hundreds, if not thousands of dollars in interest each year, just by making a phone call or two.
If after speaking with your bank you are still want to look at other lender options your next avenue is to consider refinancing your loan(s). Simply speaking, refinancing involves finding a lender that better suits your current needs and going through their finance application process. Once this is completed and you accept their offer, your loan will be moved to the new lender.
For some, going through this process can be overwhelming or daunting. If this is you, speak to a finance broker who can take care of everything for you and guide you through the process.
Finance brokers will have a large panel of lenders and products to choose from. They ensure the right product for your situation and needs is selected. Going direct to a bank does not give this level of choice. They will only discuss their own products, without comparison to their competitors. Mortgage brokers are now organising close to 60% of all new mortgages with lenders for this very reason.
How can Edgeview Finance help?
Simply put, we can look after steps one to five for you.
The Free Home Loan Review Request only takes 5 minutes to complete. We will then provide your personalized Home Loan Review within 48 hours.
What’s included in the Home Loan Review?
- review the suitability of your current loan;
- negotiate a new rate with your current lender (where available);
- provide you with a snapshot of other lender offers that you can compare your current rate against;
- also provide you with a potential strategy on how to reduce the term of your current home loan;
- provide you with a Free Property Profile report for your property or properties.
All Home Loans Reviews are obligation-free; you choose how you would like to proceed, or if you proceed further at all.
Not everyone wants to go through the above steps themselves. If this is you, check out our Home Loan Review portal which will do all the work for you. We will issue you a one-page summary in 48 hours. Not only that, we will negotiate a rate with your existing lender, free of charge.)
Edgeview Finance is experienced in residential and commercial finance brokers. We specialize in self-employed borrowers so if you have existing business lending, we can also review this for you. No matter how complex your situation might seem.