What interest rate are you paying?

How to save thousands on your mortgage.

With interest rates at record lows, now is not the time to get complacent about your mortgage.

Even a small difference in rates can significantly reduce the amount of interest payable over the life of your loan. For example,  a $500,000 mortgage with a 0.50% reduction (let’s say from 4.00% to 3.50%), would save you an extra $1,702 per year in interest.

Apply that over a 30 year loan, and we are talking about a $51,067 interest saving!

So it pays to negotiate a better rate with your lender.

Unfortunately most people are not comfortable with approaching their lender and end up putting the task in the too hard basket. Think of it another way, if a quick phone call to your lender can potentially save you $50,000 on your mortgage, there’s no excuse not to act.

To help you with the task, we’ve put together a few pointers for you:

1. Do your homework

With the proliferation of online comparison sites, its never been easier to compare mortgage rates.

Doing the home work first will give you the confidence to negotiate with your current lender.

But make sure to take into account the various features of the mortgage. Factors such as the interest rate of the loan and other charges are all important in making the decision, but you might be looking for other features such as a mortgage offset account.

2. Make the phone call

Its obviously much easier to keep your existing mortgage with the current lender, so make sure to first call your lender and tell them you’re dissatisfied with your current rate. Let them know you’ve been shopping around and list the competitive rates you’ve found elsewhere.

Remember, they want to keep your business and its in their interest to offer a lower rate than have you move elsewhere. Most lenders will update the rate on the spot.

3. Show me the money – or walk

If your current lender wont show you the money, then don’t be afraid to go elsewhere.

Refinancing may seem like a lot of work, but the process has been simplified over the years. Using a mortgage broker will cost you nothing and take the hassle out of switching.

Remember we have a network of brokers than can assist you.

Watch out for fees when closing your existing loan. Early termination fees for fixed interest rate loans can add up to thousands.

It’s a good idea to ask your new lender about refinancing fees as this can influence the decision to switch providers.

4. Make sure to do a yearly health check of your mortgage

Don’t get complacent once you have made the switch or been offered a better deal.

Perform an annual check on your home loan to ensure you’re still getting the best deal. It pays to stay up to date with the RBA interest rate cuts to see if your lender is passing on the rate cuts.

In the banking industry loyalty doesn’t always pay off, so a quick phone call could literally save you thousands of dollars in the long run – so stay proactive!

If you would like a free mortgage health check then please contact our office.

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