Yellow Brick Road: Home

How to switch to a better home loan rate

In this article:

If your home loan is over two years old there's a good chance that your rate isn't competitive. Here's a quick step by step guide on switching to the best market rate.

With multiple rate cuts and lenders vying for the business of low-risk borrowers, if you are financially secure and have a home loan that's over two years old, there’s scope to lower your rate. Let’s look at how you should go about doing it.

Do your research

Good research can make the switch to a lower rate a lot easier. Here's what you need to know.

  • What is the rate your Lender is offering new customers? If your rate is over two years old, there is a good chance that your rate is higher than what your Lender is offering new customers. Check to confirm if this is indeed the case.
  • What is the equity you've built in your property? Lenders usually charge lower rates for lower LVR (Liquidity Value Ratio). LVR is a percentage of the property price that's covered by your home loan. An 80% LVR means that 80% of the property cost was paid for with a home loan. Let's say as an example, your home loan has a 90% LVR, and over time your property has appreciated causing your LVR to drop to 70%. In such a circumstance, you should ask your Lender to revise your rate to what it is charging new customers for a 70% LVR loan.

Have a conversation with your Lender

Equipped with information on how much higher your rate is over new customers and the equity you hold in your property, have a conversation with your Lender. Urge them to match your rate to what they are offering new applicants for the current LVR of your loan.

Take the first step

Compare your Lender's best rate with the market

It may just be possible that even if your Lender brings down your rate to what it is offering new customers, you could save a lot more by switching to a lender that is offering an even lower rate. Scope the market to see the difference between the lowest rate in the market and your Lender's best rate. If the difference is substantial, seek professional advice around refinancing.


Seek professional advice

The product with the lowest rate may not be the best option for you. Features like offset account and redraw facilities could contribute significantly towards quicker homeownership. Engage with a mortgage broker for a clear understanding of the following.

  • Is there another lender that is offering a better rate than your current Lender?
  • Is the lowest rate product offering the best option for your circumstances? Would a switch to a product with a lower rate result in a compromise on essential loan features?
  • Given your circumstances and requirement for specific product features, identify the best possible rate available for you.

In addition to helping you make an informed decision; a mortgage broker will also take care of your application paperwork and make the process a lot more hassle-free in case you choose to refinance.

Reach out to us for the best way forward as per your circumstances.       

The information is a compilation from various sources for your benefit and should not be relied upon in lieu of appropriate professional advice.  



Feature Articles

A Guide to Mortgage Pre-approval In addition to providing a clear idea of your borrowing capacity, a mortgage pre-approval can also expedite property purchase. Here a few things you need to consider before applying for one.

What to consider while switching to a lower fixed rate If you're considering switching from a variable rate to a fixed rate loan in the wake of the recently announced RBA rate cut, be sure to weigh the saving benefits against possible trade-offs like no offset account and redraw facility.

What the November RBA rate cut means for borrowers Here's a quick guide on how to benefit from the recent RBA rate cut on 3rd Nov 2020

Decoding property price rise & the latest RBA rate cut Here's why gradually rising property prices and all time low interest rates make it perfect time to hop on to the property ladder.

Dos & Don’ts of applying for Govt. Property Schemes Don't let Govt. schemes & grants interfere with your search for the right property. Here's what you need to keep in mind.

View all articles

Enquire now