Owning your own home is the quintessential Australian dream. But, paying off your home loan is something that causes many Aussies to lose sleep, particularly in today’s unstable financial climate.
According to the Australian Bureau of Statistics, the average home loan in Australia is $408,987, and is steadily increasing year-on-year.
According to Deloitte’s 2020 Australian Mortgage Report, Australia is currently facing a number of changes, such as housing-related negatives and a lack of confidence among consumers and businesses.
In such uncertain times, there is one single action that could help you save hundreds of thousands of dollars on your home loan repayments – engaging the services of a mortgage broker.
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What is the role of a mortgage broker?
If you’ve purchased a property, the chances are that you worked with a mortgage broker at some point during your dealings. As many of you will know, mortgage brokers act as intermediaries, negotiating mortgage loans with banks on behalf of individuals or businesses.
What are the benefits of a mortgage broker?
In addition to their extensive network and industry contacts, one of the most significant benefits of working with a mortgage broker is their ability to find you the best rates.
Most mortgage brokers work on a commission basis. They are paid an upfront commission and also an ongoing commission for the business they bring to the bank, which is only paid out once your home loan is settled.
Put simply, this means mortgage brokers are incredibly results-driven, which is a huge benefit for you as a client. It is in the best interest of your mortgage broker to find you the best deal.
How do I renegotiate my mortgage?
Many Aussies will only get in touch with a mortgage broker when they first purchase a property or when refinancing after a few years. But you should also consider renegotiating your mortgage annually or every two years. It’s a small effort for maximum reward, and this one action can save you hundreds of thousands in the long run.
If you have a home loan of $500,000 and are set to pay that off over a 30-year period with an interest rate of 3.49%, you’ll pay $307,276 in interest over the lifetime of the loan.
However, if you renegotiate that rate to 3.1 per cent, you’ll reduce the interest you pay over the lifetime of the loan to $268,630. That one decision would save you a whopping $38,646 in interest repayments.
And if you look to renegotiate every one or two years, that saving will be even bigger.
Here’s another example.
If you’re paying an interest rate of 3.19% on a current loan of $500,000 over 25 years, you’d be making monthly repayments of $2,421. If you negotiate your interest rate to 2.19 per cent, that decreases your monthly repayments to $2,166, saving you $255 a month.
Do I need a mortgage broker to renegotiate my home loan?
Think you don’t need to use a mortgage broker? You might want to reconsider.
Mortgage brokers are proven experts who have the time, connections and experience to do all the heavy lifting for you and they don’t get paid unless they deliver.
It is possible to renegotiate your home loan yourself, but if you go down this route you absolutely must do your research and ensure you’re armed with the facts.
Don’t ask your bank what the best rate they can offer you is. They won’t be inclined to reduce your rate. Instead, do your research on what other banks’ rates are and have these comparison rates on hand.
When you do approach your bank, ask them to match the lowest of these rates you’ve uncovered. It’s your responsibility to know what other banks are offering so do the homework and you’ll reap the rewards.
The most important tip
The most important thing, when it comes to renegotiating your mortgage, whether you’re doing it yourself or through a r mortgage broker, is that you must be prepared to walk out if your bank doesn’t offer you a good deal. Do not pay a loyalty premium to the bank simply because you forgot to ask.
You need to be confident to threaten to walk away (in the hopes that that’ll bring the rate down), and you if need reinforcements, speak to an expert and have them come along with you.
Good luck, and happy negotiating!
Shivani Gopal is the Founder and CEO of The Remarkable Woman; a women’s mentoring and leadership platform.