Home Loans – don’t be afraid to talk to you bank

Interest rates are always a hot topic especially in the JBS office. Most of the team are now home owners and we often discuss who has what rate and with which lender etc. It was after one of these discussions I discovered that after two years with my current lender, I didn’t have a very competitive rate.

I went online and checked my statements and found that in two years I had incurred three rate increases, even though the last time the RBA actually raised rates was November 2010. This raises a question – how many rate rises have you incurred from your lender?

So with this information I decided to look at other lenders, considering I wasn’t getting the best deal with my current lender. I spoke with a couple of lenders to find out establishment costs and if there were any ongoing fees. Without too much trouble (about 15-20 minutes on the phone) I had found several loans with a more competitive rate with the same, and in some cases more features than my current home loan.

I emailed my current lender with the rates I was quoted just to see what they could do. Within hours of my initial email I received a response explaining they would reduce my rate. Now they didn’t match the other lenders quotes as these would be introductory offers for the first 12 months. However this does show you that asking the question can’t hurt and can save you hundreds of dollars a year.

The below shows how even 0.05% can make a difference on an average home loan in Victoria –

–  $380,000 x 3.95% = $15,010 interest p/a
–  $380,000 x 4.45% = $16,910 interest p/a

My belief is the banks rely on the everyday person just accepting the increase thinking they have no choice. However you now have options, you can do what I did and ask for a rate reduction if you are happy to stay or shop around for a new lender to refinance.

The Government abolished exit fees on variable loans allowing people the choice to shop around and also have the option to pay off their loans earlier. Some lenders still charge “discharge fees” for legitimate administration costs or if you repay the loan amount within a stipulated time frame (say five years).

If you have a fixed loan you will need to check with your lender as break fees depend on multiple factors like the original loan amount, outstanding balance, how much time remains on the fixed term so best to contact the lender before making any decisions. You also need to check when your loan commenced as this may also play a part on whether it is beneficial for you to switch lenders.

My advice is don’t be afraid to talk to your lender about your interest rate. If you aren’t happy or know there is a better deal for you don’t be afraid to leave – most lenders even have mobile lenders that can come to you at a time that is most convenient for you, the other option is using a broker which can save you a heap of time also.

Whichever option you take, before making a decision it is important to truly understand the costs of leaving, and also understand the fine print of the new loan that you are committing to. That way you can make a truly informed decision.

JBS has our own ACL and also work very closely with a number of brokers who we would be happy to refer you to if you would like a review.

– Pj –