Have you recently had to tap into your savings for unexpected expenses? Or are you dying to go away on holidays but your home loan repayments are sapping your funds? You might want to consider renegotiating with your lender. In fact, according to a KMPG study, 61 per cent of Australians renegotiate their home loans at least once every five years. Here are some of our best tips when renegotiating your loan.
Shortlist other loans
Ask your lender for a key fact sheet on your loan to use for comparison and research online — there are some great comparison websites out there such as Canstar. You should also call different banks to speak to a representative in person and ask if they are able to offer a loan for your personal situation.
Investigate your shortlist
Draw up a checklist, with columns for whether the loan is variable or fixed, the comparison rate of each loan, potential start-up fees and ongoing monthly or annual fees. Another thing to think about — what kind of repayment schedule does each loan offer? And don’t forget to check if there are early termination fees, in case you want to renegotiate again in the future.
Talk to your lender
Once you have an understanding of what the competition is doing, meet with your lender to discuss your options. Ask your lender if they’ve introduced new mortgages with better benefits since you took out your loan. For instance, if you took out a fixed rate mortgage five years ago, and your bank is now offering the same kind of mortgage for a lower interest rate, you might be able to negotiate to gain those same terms.
It may be that you have the best deal with your current loan. But if you have been making your repayments on time, have multiple investment loans with the same lender or have referred friends and family then you can use all this as leverage to secure a better deal.
Work out the cost of switching
Did you know lenders are not allowed to charge exit fees on loans taken out after 30th of June 2011? If you secured yours before then, talk to your lender about what kind of costs you’re looking at. If you’re on a fixed rate loan, you may need to pay a break fee.
Lender’s Mortgage Insurance
If your loan is more than 80 per cent of the current value of your home, you may have to pay LMI. This is a type of insurance which credit providers take out to protect themselves from a situation in which the borrower may not be able to pay the loan.
If you had to pay LMI on your current loan, make sure you have enough equity in your home to avoid paying again. If you’ve only had your loan for a year or two, you may get a refund of some of the LMI premium you first paid.
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