How to renegotiate your mortgage

The COVID-19 crisis has been a difficult and uncertain time for many Australians, meaning now may be a good time to renegotiate your mortgage.

According to a recent KMPG study, 61% of Australians renegotiate their home loans at least once every five years, so we have put together a list of tips to help you renegotiate your loan.

Shortlist other loans

Ask your lender for a key fact sheet on your loan to use for comparison and research online — there are some great comparison websites out there such as Canstar. You should also call different banks to speak to a representative in person and ask if they are able to offer a loan for your personal situation.

Investigate your shortlist

Draw up a checklist, with columns for whether the loan is variable or fixed, the comparison rate of each loan, potential start-up fees and ongoing monthly or annual fees. Another key thing to think about is the kind of repayment schedule each loan offers. 

Don’t forget to check if there are early termination fees, in case you want to renegotiate again in the future.

Talk to your lender

Once you have an understanding of what the competition is doing, talk to your lender to discuss your options. Ask your lender if they’ve introduced new mortgages with better benefits since you took out your loan. 

For instance, if you took out a fixed rate mortgage five years ago, and your bank is now offering the same kind of mortgage for a lower interest rate – which may very well be the case with the record-low interest rates – you might be able to negotiate to gain those same terms.

Use leverage

It may be that you have the best deal with your current loan, but if you have been making your repayments on time, have multiple investment loans with the same lender or have referred friends and family then you can use all this as leverage to secure a better deal. 

Work out the cost of switching

Did you know lenders are not allowed to charge exit fees on loans taken out after 30th of June 2011? If you secured yours before then, talk to your lender about what kind of costs you’re looking at. If you’re on a fixed rate loan, you may need to pay a break fee. 

Lender’s Mortgage Insurance

If your loan is more than 80 per cent of the current value of your home, you may have to pay LMI. This is a type of insurance which credit providers take out to protect themselves from a situation in which the borrower may not be able to pay the loan. 

If you had to pay LMI on your current loan, make sure you have enough equity in your home to avoid paying again. If you’ve only had your loan for a year or two, you may get a refund of some of the LMI premium you first paid.

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