With interest rates at record lows, Australians have been urged to check they’re getting the best rate possible.
However, actually having the conversation with your lender to secure that rate can be daunting.
Yahoo Finance spoke to 86 400 chief financial officer Belinda Hogan to find out just what Australians need to know.
Don’t be intimidated
The first rule is simple: don’t be scared.
“The first thing is not to be intimidated by it. It might obviously feel like mortgage is a big deal, but there are two different scenarios here,” she said.
“Either you are in financial hardship and you are struggling to make repayments. There are specialist teams that deal with that.”
Those groups will have a greater understanding of the situation you’re in and will quickly look at ways to help those borrowers out.
The second scenario is that you’re not in financial hardship but would like to get a better deal.
“This is true of nearly every Australian [home owner]. In that situation, it’s really about having a look around for what deals are out there, and looking at not only your interest rate but also the features and fees attached to your mortgage.”
Call sooner rather than later
“If you feel like your payments are causing you financial hardship, it’s best to make the call early,” Hogan said.
“If you know that your job has been affected by the end of JobKeeper, and maybe you’ve already had your last paycheck, don’t wait until you’ve missed your first mortgage repayment or are about to miss your first mortgage repayment, or that first letter from the bank turns up. Give them a call now.”
Do your research and consider the features attached to the mortgage
But first, have a look at what interest rates are out there and see how yours stacks up.
“It’s looking not just at your interest rate, but also your features and your fees on your mortgage as well.”
For example, an offset account - when used appropriately - can save borrowers a lot of money. However, if you’re not using an offset account but you’re paying for it, it may be worth jumping to a different option.
She said offset accounts are often misunderstood, but explained that an offset account - or even multiple offset accounts - is simply another way for borrowers to structure their money.
“A lot of people before they get a mortgage will break down their money into their grocery account, their bills, their fun spending money and their holiday savings.
“They’ve got a really great structured way of going about money, but then they get a mortgage and only one offset account and all of that structure falls away.”
She said having an offset account that borrowers can link several other accounts to means they can structure their money the way they like, without losing the benefits of the offset.
Then, it comes down to having the chat and saying: “This is what I’ve found, I’m on this interest rate and I know that another lender has interest rate ‘Y’, and I’d like you to look at matching that.”
If the bank decides to match the rate, then you’ve won. If they don’t, then you’re already one step ahead to refinance.