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How to negotiate cheaper home loan rates during a pandemic

August 14th, 2020

Wages growth has stagnated and unemployment is historically high, but cash-strapped households can stretch their money a little further by slashing their mortgage costs. 

Although the average mortgage rate has fallen over the years to just 3.43 per cent, many customers can make big savings by negotiating a better deal with either their existing lender or someone new.

But if borrowers want to get rates closer to 2 per cent, they will need to put in some work.

“Research and preparation are more important than any other step in the process,” Canstar financial services executive Steve Mickenbecker told The New Daily.

Arm yourself with knowledge

The first step is to do your research, which should involve more than simply scoping out what other lenders are offering. 

Mr Mickenbecker said borrowers should review three key factors: Their credit score, their income and job security, and the actual value of their home.

This last point is relevant as the pandemic has already dragged down property prices and will continue to weigh on them – pushing some home owners into negative equity.

Lenders are unlikely to offer better deals to owners in this situation, as they risk losing money if the borrower defaults. 

And if borrowers are uncertain about their employment and income status, or have a poor credit rating, then their chances of negotiating a better deal will be even lower, as the lender will have little faith in their ability to repay. 

You will need to have a clean bill of health in all three areas before a lender agrees to offer you a more competitive rate.

But Mr Mickenbecker said borrowers who receive JobKeeper wouldn’t automatically be ruled out – so long as they could confidently explain why they would soon return to normal employment.

Continue reading about how to negotiate a cheaper home loan.

First published on www.thenewdaily.com.au and republished with permission from The New Daily. For the full article visit The New Daily website.