WHEN it comes to getting a better deal on your mortgage, a bit of old fashion haggling can go a long way, even with your existing lender.
Pester power doesn’t just work for kids who nag their parents in the supermarket, it also works for mortgage customers looking for a better finance deal. But before you pick up the phone, first, you must decide what exactly is a better mortgage.
“What constitutes a better deal, is its interest rate, fees, features, flexibility or service?” says Resi chief executive Lisa Montgomery. Ideally, you need a mortgage that ticks the boxes on all five, she says.
“There is no denying we are all looking for a competitive interest rate, if you think that your lender could be offering a better rate you should start there with your negotiations. But before you do, you need to do your homework on what’s on offer from others and put your case to your lender.
“Most lenders will do their best to consider this type of request and, if you have been a loyal client over the years, it will stand you in good stead.
“However, the best mortgage deal is the one that delivers on all five aspects of your loan: competitive rate, low or no fees, great features such as a redraw and offset facilities, flexibility such as being able to fix your loan or borrow more money when you need to and, of course, good service.”
This means you also need to do some homework on yourself and what you expect or want from a mortgage before you start negotiating.
Despite many borrowers being reluctant to haggle, making the effort can be very worthwhile, says financial comparison company Mozo.
A survey by the company late last year found Australians are more likely to haggle over the price of a toaster then they are likely to haggle over a long-term commitment such as a mortgage.
Mozo found that less than 30????????????????????????per cent of borrowers negotiated with their lender before taking up their mortgage, with the vast majority, 70 per cent, just taking what they were offered.
“Only a third of men and a quarter of women ask for a better home loan deal, despite the fact they can save tens of thousands off the average mortgage by doing so,” Mozo’s Kirsty Lamont says.
“Many Australians are reluctant to challenge financial institutions and feel that the banks are the ones with all the power,” she says.
“The truth is, borrowers these days have more power than they realise. A typical borrower with a $300,000 home loan should be able to get a rate discount of at least 80 basis points (0.8 of a percentage point) off the standard variable rate.
“Many banks have off-the-shelf discounts for packaging your home loan but they don’t generally advertise their lowest rates. It’s only customers who push the hardest that get the best deals.”
A secret shopper survey last November found the major banks were prepared to offer discounts of up to 1 percentage point on a $300,000 loan to Mozo negotiators, Lamont says.
Assist Finance Corporation managing director Jason Di Iulio says the best deal will be achieved by borrowers who come prepared to negotiate.
“Understand your current loan terms, for example, is it fixed or variable? What are the rates and fees or any other conditions? Make a note of these and then work out what you need,” Di Iulio says.
“Make a list of your requirements such as a low interest rate, split loans, interest only and so on. Also consider whether you will need a redraw facility, consolidation of other debts and account access.”
Next, shop around. Get advice from a mortgage broker and go online to see what type of offers are currently available.
“Once you have established your needs, combined with the terms of your loan, approach your lender for a better deal,” Di Iulio says. “Ask for further discounts and present your quotes. Ask what is your current lender prepared to do to strengthen your relationship with them?”
First-time borrowers can often feel at a disadvantage, Montgomery says.
“The key is to present well,” she says. “Confirmation of income, proof of deposit, statements for other loan accounts and any other relevant information will make it much easier to negotiate.”
HOW TO NEGOTIATE A TOP MORTGAGE
* Information is power: Do your research, tell the lender what rates you can get elsewhere and make it clear they’ll have to do better to win your business.
* Ask for more: When quoted an initial discount, ask if that’s the best they can do. Banks tend to reserve their biggest discounts for the toughest customers who keep asking.
* Bargaining chips: Offer to bring other business to the bank such as life insurance, credit card or financial planning needs to increase your bargaining power.
* Deals and discounts: Don’t limit yourself to rate haggling. Push for waivers or discounts on application or ongoing fees too.
* Call in an expert: Speak to an industry expert or get help with your negotiating. If you’re not comfortable talking money then get an expert to haggle for you.