Everyone loves snagging a good discount! Entering into a new home loan agreement is a big financial step. And getting a cracker of a deal on your mortgage can save you thousands of dollars.
But with a large number of banks, lenders, and loan types in Australia, it can be confusing. But finding the best home loan deal for you doesn’t have to be so. Online comparisons have never been easier with digital calculators, tools, and online mortgage brokers, like YouBroker.
Home loan interest rates differ for a number of reasons, and it’s important to know why when shopping for a mortgage so you can gauge your bargaining power. That’s why we’ve assembled this helpful information.
Are you a home buyer or are looking you to refinance and want to get a great rate? Then this is the article for you.
Do Your Homework and Compare Lenders, Interest Rates, and Home Loan Offers
There is a vast amount of loan products out there, vying for your business. It pays to do your research to get the best deal to suit you and your financial situation.
And it has never been easier to do so. Increasingly banks, lenders, and mortgage brokers, like YouBroker, offer online tools, and calculators to make the comparison process more convenient.
You can punch in your financial information to calculators that will determine what type of home loan interest rate, and the loan amount you can expect. Also, you can see what type of loan products you may be eligible for.
But you’ll need to look into more than just the interest rate of potential home loan contenders. Investigate comparison rates. A comparison rate is a combination of the interest rate and other fees and charges involved so you get a better picture of what a home loan will cost you.
What you’ll tend to find online and in your comparisons is the standard variable rate. This is a general benchmark rate that lenders set for home loans. But banks and lenders can offer a discounted rate dependent upon the assessment of your financial situation and other factors.
All of this can be overwhelming and confusing due to the large range of options out there and the jargon. Particularly if you’re time-poor, a first home buyer, or have a more complex home loan application, like the self-employed.
That‘s why YouBroker created a convenient online platform to make comparing home loans and lenders a breeze. You can get access to a wide range of banks and lenders. You‘ll also have the knowledge and expertise of an accredited mortgage broker on your side.
Take A Look At Home Loan Packages
When comparing deals, it’s a good idea to check out home loan packages on offer from banks. Some home Loans come in packages that provide annual fee discounts, interest rate discounts, offset accounts, and deals on credit cards, transaction accounts, and other financial products.
There’s usually an application fee or annual fee involved for these types of packages. But sometimes they can work out to be a good deal depending on your financial situation and individual needs.
Understand How Banks Determine Interest Rates And Deals For You
Getting educated on how banks and lenders set their home loan rates can help you get a good deal. Knowledge, after all, is power.
Also, learn about what lenders take into consideration when assessing a home loan application. That way you can gauge your financial position and see what your bargaining power is for a better deal.
So without further ado, let‘s look at how interest rates and deals are determined.
RBA And Mortgage Interest Rates
The official cash rate set by the Reserve Bank of Australia (RBA) controls the circulation of money within the economy. The cash rate is set to create a balance between inflation and deflation. And it has an effect on your mortgage interest rate.
If you have a variable interest rate home loan, your rate is tied to the RBA cash rate. If the cash rate increases, so does your home loan interest rate, and vice versa.
But with a fixed rate home loan, your interest rate is generally fixed for the life of the loan.
Changes in the cash rate have an impact on the interest rates offered by banks and lenders. When the cash rate rises, so do mortgage interest rates. Therefore keeping an eye on the RBA cash rate is important to decide if a fixed rate home loan or variable rate home loan is the way to go, depending on your eligibility and your financial situation.
Your Loan Amount
How much money do you plan on borrowing for your home loan? Usually, the larger the amount you plan to borrow, the better your negotiations will be for deals and low interest rates.
Customers borrowing higher amounts tend to bring more money to banks and lenders. So they will court you like you’re the belle of the ball.
Your LVR
What’s your LVR (loan-to-value ratio)? Your LVR is determined by how much you borrow in relation to the value of the property. If you are borrowing an amount that is below 80% of the property value, your bargaining power with banks and lenders increases.
Your Credit Score
You’ll have more bargaining power for great rates and deals if your credit score is in fantastic shape. Banks and lenders look to credit scores as a considerable determining factor of your financial health. Home Loan providers want to see how much of a risk you are if they loan you money.
A healthy credit score says to a potential lender, '“I’m really great at making repayments and I‘m a lower-risk candidate for a home loan.“ And that’s music to their ears.
If you have a low credit score due to defaulted repayments or minimal credit history, you may still be eligible for a loan with some lenders. However, expect to pay higher interest rates.
If you do have a history of credit issues, working with a reputable mortgage broker, like YouBroker, is a great idea. They can point you in the direction of the lenders more likely to assess your home loan application. And a good mortgage broker can guide you with tips for budgeting and making your financial position look more appealing to home loan providers.
Your Loan Type
What type of loan are you applying for? Low doc, alt doc, and construction loans generally receive fewer discounts and higher interest rates. This is because banks and lenders see you as more of a risk than a customer applying for a standard home loan.
Also, not all lenders are willing to provide these types of home loans. So working with a mortgage broker is a good move. They can guide you through the process and point you in the direction of suitable lenders and banks.
Your Property Type
Are you purchasing an investment property? Or are you planning on being an owner-occupier?
Investment loans tend to have higher interest rates. This is because banks and lenders view investing as more of a risk.
Also, some banks and lenders will base their rates on the location of the property, particularly if you are purchasing an investment property. So prepare for that to potentially be a factor.
Your Loan Term
Longer-term loans will usually attract higher interest rates. However, on shorter-term loans, while you can be offered a lower interest rate, the monthly repayments can be higher. This is to account for the shorter time frame to pay off your mortgage.
Get Your Financial Situation Organised
What is your financial situation like? Can it be improved? Get your financials sorted out and look into your budget and living expenses.
Reduce your debt, improve the health of your credit score, and boost your savings. Having a deposit that consists of actual savings is viewed as favourable by home loan providers. They see this as a good sign that you will be able meet home loan repayments and are responsible with your money. You’re less of a risk in their eyes.
Do you have a non-traditional income stream, are self-employed, a contractor, or a casual employee? You will have to really showcase that you are responsible and organised when it comes to finances. There can be added documentation you’re expected to “pony up” before lenders will consider your home loan application. And make sure you’re dealing with lenders who have eligibility for applicants in your situation.
Complex home loan applicants could increase their chances of landing a great home loan by working with a mortgage broker. A good, qualified mortgage broker, like YouBroker, will help with financial document requirements, and work with lenders who offer self-employed, low doc, or alt doc loans.
Having rock-solid, organised finances will enhance your negotiations with banks and lenders. When you look enticing to a lender, they’re more likely to want to offer you cashbacks and incentives to take out a home loan with them. So it behoves you to get everything in order!
Look Into Loyalty Discounts For Borrowers
Being loyal to a bank or lender when it comes to your home loan isn’t considered the wisest move. That’s because they tend to only offer wow factor deals to attract new customers.
Banks and lenders know that many home loan customers will eventually look at refinancing with another lender. We all want that shiny new customer deal!
But some lenders will offer loyalty discounts to prevent losing you to another lender.
Does your lender of choice offer loyalty discounts? If so, it may be worth looking into. You may be eligible for an interest rate discount and other possible perks.
Ask For An Interest Rate Discount On Your Mortgage
You’ll find that most banks and lenders don’t want to lose a mortgage customer. if you’re thinking of refinancing your home loan, your lender may be willing to work out a deal.
Let them know that you’re looking for, or have found better deals elsewhere. And if they don‘t offer good loyalty discounts, ask them if they‘re willing to provide you with their new customer rates.
Most lenders will want to negotiate to avoid losing you to another financial institution. They don‘t want the hassle of processing a transfer and they don‘t want to lose a paying customer. So, it is often in their best interests to give you a deal.
Refinance Your Home Loan
If at the end of the day, your bank or lender won’t come to the party with a better deal... You can look at refinancing your home loan elsewhere.
Do the comparisons and research to find the most suitable deal for you. Or work with a reputable mortgage broker for added convenience and to save you time.
And yes, it can be a hassle and a slight inconvenience transferring a home loan to another financial provider. But there can be thousands in savings and other possible additional perks. And if you’re working with a good mortgage broker, like YouBroker, they’ll help you with the transfer process.
The Wrap Up
Taking the time to compare home loan products can make your financial situation better in the long run. Banks and lenders want your money. And being in a good borrowing position makes it possible to bargain for potentially outstanding interest rates and deals.
And if you already have a mortgage, negotiating with your lender or refinancing could land you interest rate discounts, and perks.
Digital calculators, tools and online mortgage broker services can make working out the comparison rates easier for you. And they can facilitate finding a deal to save you thousands over the life of the loan.
Interested in more articles on finance, real estate, lifestyle and more? Check out YouBroker‘s blog here.
Need A Hand Finding The Best Interest Rates and Discounts For Your Home Loan?
Let YouBroker do the legwork for you. Take the hassle out of comparing home loans and lenders and take advantage of our easy-to-use online platform.
You’ll be able to take control of your home loan and refinancing journey with access to a myriad of lenders and the best cashbacks and deals. You‘ll also have expert advice and guidance from our team of mortgage brokers.
Applying for a home loan has never been easier or more convenient. No more multiple home loan application forms. With YouBroker we have “one form to rule them all”.
And you can check your mortgage progress on our 100% fully secure online portal.
When you work with YouBroker, you can rest assured that you are working with a reputable mortgage broker team. We have an Australian Credit Licence, are fully qualified and are members of the Mortgage and Finance Association of Australia (MFAA).
Why not contact YouBroker today? We‘d love to help you to get an amazing deal on your home loan.
