Are you looking to buy a home this year? Or are you currently a homeowner paying off a home loan?
If you want to find out how you can save big on your home loan in the long run, it's important to take the necessary steps throughout the life of your loan. And who better to ask than the home loan experts?
In this article, we share 10 tips from our Aussie Brokers that could help you improve your chances of becoming a successful homeowner.
Tip #1: Find a good mortgage broker instead of going directly to your bank
Tracey Hammond, Franchisee at Aussie Mosman, talks about the benefits of linking in with a mortgage broker for help.
“Over 70% of new residential home loans are facilitated by mortgage brokers and there’s a good reason why. Mortgage brokers have a panel of lenders from which they can compare offers to find a suitable loan for your situation. It can really broaden your horizons and best of all, our service is free to you,” she says.
“As an example, I had a client who was pre-approved directly through her bank. She found a property, put in an offer and the bank declined. This was due to their policy that the property had to be over 40m2.
"Unfortunately, there are many policies that customers have no way of knowing, so it’s best to engage an expert who can find the most suitable and cost-effective loan for your individual circumstances. This approach gives you the best possible chance of a positive outcome.
“Luckily for my customer, I was able to find another lender for her very quickly, her loan was approved and her first property was purchased,” she explains.
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Tip #2: Get pre-approval before you look for a property
Hammond shares the importance of getting pre-approval before getting serious about your search.
“Before going to look for properties ensure you have a pre-approval in place, so you know your borrowing capacity,” she says.
“Often customers go looking before they obtain finance. It can result in them finding properties that are out of their budget or missing out on properties as they don’t have finance in place to go to auction.
“It’s amazing how many customers find their dream property on the first weekend they look but they’re not ready to proceed. That’s why it’s a smart idea to get pre-approved to avoid any disappointment,” she explains.
Tip #3: Negotiate your interest rate every 6 months
“With interest rates continuing to rise, it’s important not to ‘set and forget’ your home loan,” says Hammond.
“After 8 consecutive rate rises in 2022, existing customer home loans have fallen out of line with what lenders are offering new customers.
“Mortgage brokers will typically negotiate your interest rate once per year. In the current environment, if your mortgage broker isn’t trying to negotiate your rate every 6 months, follow them up.
“If you obtained your home loan directly through a bank, the bank is not going to decrease your rate unless you bring it up and negotiate with them,” she explains.
Tip #4: Find a broker that takes the time to get to know you
Jordan Ross, Franchisee at Aussie Shellharbour says, “finding a broker who is motivated to understand your situation, wants, needs and goals is important. It helps shape the home loan guidance they give you and will allow them to help you hit the goals you’ve set.”
An increasing number of home loan holders are turning to mortgage brokers for help.
“Speaking to a broker can simplify the home buying and refinancing process, especially if you want to compare different loan products from a range of lenders. It can save you both time and money,” says Ross.
Recent research revealed that on average, borrowers who refinanced with a broker saved $409 on their monthly repayments, compared to $249 for borrowers who went direct to their lender.
Tip #5: Make every cent work for you
Ross explains that making smart decisions with your money can help you save big in the long run.
“Too many people have ‘lazy deposit funds’ at various banks that are neither earning interest nor saving it. Make sure your lending is set up in a way that any money you have is working to reduce your interest costs.
“For example, if you have savings just sitting in your bank account, it could be a smart move to get an offset account and store your savings there instead. That way you can still easily access your funds at any time while offsetting the balance of your loan to reduce your interest,” says Ross.
Tip #6: Find out your current Loan to Value Ratio (LVR)
Nathan Rayner, Franchisee at Aussie Claremont talks about how valuable it is to know your LVR, even as a homeowner.
“Over time and as you pay off your home loan, your LVR will change. Many customers may have passed a LVR ‘threshold’. For example, if you had a 90% LVR 2 years ago, it may now be under 80%.
“By passing this threshold you may get access to lower interest rates or a more competitive deal at your current or another lender. With your current lender, these lower rates won’t kick in unless you ask,” says Rayner.
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Tip #7: Consider a split loan
Rayner says that many customers forget that you can split your rate, which may be helpful when you’re unsure about getting a fixed or variable home loan.
“Customers often ask whether they should go with a fixed or variable rate. However, it doesn’t have to be one or the other.
“Many customers gain benefits from a split loan which allows for some certainty in a changing rate market. This allows them to have steady repayments on the fixed portion while having flexibility on the variable portion. So, they can still access lower rates if they go down, offset accounts, extra repayments and so on,” says Rayner.
Tip #8: Refinancing ≠ moving all your banking
Rayner addresses a common myth that may have mortgage holders avoiding a refinance.
“It’s important to know that you don’t have to move all your banking when you change your home loan provider.
“With digital banking, it’s very common for refinancing customers to leave their current accounts in place and only move their loan account to a new lender.
“This reduces a lot of the ‘effort’ hurdle for customers when considering refinancing options as pay, direct debits and so on can all be left in place,” explains Rayner.
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Tip #9: Know your credit score
Donn Tariga, Mobile Broker in the Greater Sydney area, explains the importance of knowing your credit score.
“There are major benefits to understanding your credit score as most lenders will look at your credit file. You can check with Equifax if you qualify for a free credit report.
“Undisclosed debts may affect your application with a lender. For example, if you have a personal loan with zero balance but the facility is still open, this could lower your credit score. Closing these liabilities will not only improve your credit, but it could also improve your borrowing capacity.
“If there is any inaccurate information on your credit report, it’s beneficial to correct these mistakes before you apply for a loan with a lender. An Aussie Broker can help you navigate your credit file to get you in a better position for when you’re ready to apply,” he says.
Tip #10: Ask yourself, are you ready?
While buying a property is an exciting step, it’s also a huge commitment to take on. Tariga explains the importance of considering your financial position before taking the plunge.
“It’s important to ask yourself: do you have enough income to support the loan as well as your other debts and liabilities?
“Have you had a chance to look closely at your monthly living expenses? Lenders will often look at your last 3 months of bank statements to determine if you’ll be able to service a loan.
“Will you have enough funds to cover additional home buying costs out of pocket? These include things such as stamp duty, conveyancing fees, pest and building reports and so on.
“It’s important to assess your financials to make sure you’re ready. By speaking to an Aussie Broker, you can ensure your bases are covered, so there aren’t any nasty surprises along the way.”
If you’re interested in learning more about how to get your home loan in a better position, it’s time to reach out to an Aussie Broker. We can answer your questions and guide you throughout your property journey. Plus, home loan help from an Aussie Broker won’t cost you a cent.