6 strategies to help you renegotiate your home loan and save money

Home loans are at their most expensive in 11 years, prompting a mad scramble among heavily mortgaged homeowners to either switch lenders or negotiate a better deal with their existing one.

The value of refinancing hit a record high in June, with $22 billion worth of home loans refinanced in that month alone, the latest Australian Bureau of Statistics figures show.

The average home loan being refinanced is worth $507,053 as of June 2023, an increase of 28 per cent in four years, a new report called Navigating Refinancing in 2023 from Finder reveals.

“Rising borrowing costs are of great concern to a growing number of households. Many have reached the end of their tether – spending a disproportionate part of their income on monthly repayments,” head of consumer research at Finder, Graham Cooke, says.

“A reduction of even half a per cent can be the difference of thousands of dollars a year, which is better off in your pocket than as more profit for the banks,” he says.

The report found that as borrowers hunt for a better deal on their home loan, most are happy to cut ties with their existing lender. Cooke says it’s vital that refinancers don’t feel rushed into making a decision.

Meanwhile, the bulk of fixed-rate loans are expiring in the second half of this year, and these borrowers have to renegotiate with their current lender because they cannot refinance, Zippy Financial director and principal broker Louisa Sanghera says.

“The rapid increase in interest rates since May last year means many existing borrowers are stuck with their current lenders because they simply don’t qualify to refinance at present,” she says.

But don’t allow home loans to roll over to the advertised variable rates. Instead, roll up your sleeves and negotiate for a better deal. You could be in a strong position to get a better deal, particularly if you haven’t missed any payments.

1. Find the best rate on offer

When in talks with a new or existing lender, make sure you make it clear that you’re hunting for a better deal and that you want to know their best offer.

Go in with a clear understanding of the lender market and use this research as leverage when negotiating with your existing or new lender. “Know the market rates well and take that to your lender and ask them to beat it,” Sanghera says.

2. Speak to the retention team

Borrowers often need to talk to the right person when renegotiating home loans. “Always ask for the bank’s retention team directly as they have the best rates, rather than someone who may just be in the home loan centre,” she says.

3. Don’t take ‘no’ first time

Too many borrowers are passive regarding their home loans, and they should be proactive about bettering their situation. If the rate you’re being offered is underwhelming, repeat the same process every few months.

4. Ask for the same rate new customers get

Most lenders advertise their best rate in a bid to attract new business. Ask for this same rate offered to new customers to be extended to you. You may find lenders will be willing to negotiate to retain your business.

5. Name-drop your LVR

Many existing borrowers have built up significant equity in their homes over recent years, which they can use in negotiations.

“Lower loan-to-value ratios, or LVRs, carry lower rates with lenders. So, if your property has gone up in value, you may qualify for a cheaper rate, so make sure you know your current LVR before calling,” Sanghera says.

6. Ask for a fee waiver

Sometimes, banks won’t budge on offering a lower rate. Still, there are ways for borrowers to save. If a lender can’t lower the rate, ask if they can waive the annual fee this year for you instead.

Good luck.