A quick search on a comparative site will let you know what lending institutions are offering. Canstar or RateCity are a good start and also have some calculators to work out how much you could save.
Interest rates can vary depending on the lending institution but it is not unusual to see differences of a half of 1 per cent.
Step 2. Phone your bank
There may be no need to change loans if your existing bank is willing to negotiate.
A simple script to use is, “I have been noticing that interest rates have dropped over the last few months and I have compared my home loan interest rate with other banks. I have noticed that my rate no longer looks competitive and before moving to another bank, I thought I would give you a call to see if there is a better deal or rate that I am not aware of or if there was another way my rate could be reduced?”. In most cases they will reduce your rate just by asking.
Step 3. Be prepared to walk
Your bank might be happy to reduce your rate, but if it’s not competitive, be prepared to move your business elsewhere. Many people believe that moving banks will be a big exercise however the process has been streamlined over the years so don’t be afraid to deal with a little inconvenience as the savings should easily compensate you for the time it takes. If you are time poor or need help, consider using a mortgage broker. They will take the hard work out of comparing loan products for you and recommend something that is suited to your personal circumstances. Whether you need an offset account or redraw facility, they can do the running around for you.
Tips and traps
Changing banks doesn’t come without its warnings. Always check the comparison rate and not the headline interest rate that banks advertise to be able to see what your interest rate equates to including all costs. Check for any fees that may be payable if you do change loans and ask about valuation changes as this may influence how much you can refinance.
A final tip when it comes to loans is to always be a position to change loans if it means that you are going to save costs. To do this, ensure your personal banking is separate to your home loan. For example, if you have your mortgage through one bank, try to separate your everyday bank account with a different bank. That way, you can easily change your loans without disrupting how you operate your everyday bank accounts and any regular payments you have set up.
Remember, the banks want you entwined in multiple bank products to make it hard for you to move on, so be strong and ensure you are the one in control of your finances as opposed to your bank.
Olivia Maragna is the co-founder of Aspire Retire Financial Services. Her advice is general in nature and readers should seek their own professional advice before making any financial decisions. You can follow her on Facebook or Twitter.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and is a respected and independent financial expert.