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The Impact of a Higher Interest Rate on Your Home Loan
Most Australians will be well aware that the RBA has just announced an interest rate jump. And, the impact of a higher interest rate has left many homeowners (and potential homeowners) wondering – how does this really affect me?
The Impact of a Higher Interest Rate on Your Home Loan
Well, if you have (or are considering getting) a $750,000 home loan that is now 1% higher, you might be paying over $140,000 more in interest over the 30-year life of your loan. While this doesn’t sound good, the alternative is also true. If you’re able to secure a home loan that is 1% lower, you could save that $140,000 over the 30 years.
These numbers demonstrate the real, tangible and life-affecting difference that an interest rate rise (or fall) can make to your finances. So, what can you do about it?
Well, you want to make sure that you’re on the right side of the interest rate pendulum. In other words, you need to be negotiating a lower interest rate on your home loan and ensuring you’re saving your hard-earned cash. Here’s how to do that.
How to Negotiate a Lower Interest Rate on Your Home Loan
Do Your Research
Your first step is to do your research. Shop around and see what loans are on offer – and at what rates. You can use online tools, or platforms, or ring our helpful team (1800 674 739) who will be able to help you find some answers.
When doing your research, you’ll want to focus on comparing relevant loans (those that you would qualify for) with the one that you currently have. This will help you see what better rates might be available and arm you for your future negotiating.
Do the Work
If in your research you find that you have developed some habits that mean you are perhaps not the ideal candidate for a loan rate reduction, do the work to get yourself home loan ready. (Yes, even if you already have a home loan.) This includes taking immediate steps to pay off any credit card debt, lower your monthly spending and increase your savings.
While you might have to tighten your belt for a few months, this will pay off in the long run when you’re dancing away with lower debt.
Get on the Phone
The next step is to simply get on the phone and ask for a rate reduction. Start by asking for the introductory rate that new customers are being offered, and negotiate from there. Be sure to talk about your good credit, your payment history and any other elements that showcase you as a great borrower. And don’t forget to flash your loyalty badge. Many lenders are willing to negotiate to retain their best customers.
Remember to be confident. These kinds of negotiations are a normal part of the homeowner / lender interaction. No one will be offended by your request for a loan rate reduction.
Walk the Walk
Once you start negotiating you need to understand what you are willing to accept, and what you are not. If your lender refuses to agree to a rate reduction – and sometimes this will happen regardless of your particular situation – you need to understand whether you’re willing to walk away. Will you be able to live with your current loan rate? Or will you need to leave this lender for a better deal?
Don’t be put off by the idea of refinancing. It’s a fantastic option and one that you should consider at least annually, regardless of interest rate movements. In today’s digital world the entire process can be completed in as little as a week, and the difference it can make to your pocket is well worth it.
Enlist the Help of an Expert
If you’re feeling the impact of a higher interest rate on your home loan and finding that your current lender doesn’t want to budge on interest rates, or you’re ready to understand your options for refinancing, reach out to our team. We’re ready to help you get the best interest rates available. And ensure you’re keeping your money in your own bank account.
