3 Secrets To Getting A Better Mortgage Deal

Interest rates are the epicentre of focus for most homebuyers because they don’t know that many other factors affect the price of a loan.The way you can get the best possible deal on your mortgage varies depending on your situation.A low rate is important. The lower your interest rate, the lower will be your monthly repayments on your mortgage.So, how do you go about getting the best deal for yourself? Let’s dive in!

Can I get the best possible interest rates?

Typically you can get the cheapest loans if you have:

• Simple loan applications: That means you are not self-employed, buying in a capital city, have a perfect credit history and high income.
• A large deposit: Some lenders offer special rates if you borrow 60% or less of the property value. However, many lenders have very sharp rates if you borrow 80% or less.
• A large loan: Home Loan Experts can negotiate better rates with lenders than what they advertise. The larger your loan, the better the interest rate you can get.
• An owner-occupier loan: If you’re living in the property, you get a better rate than if it’s an investment property.
• Principal and interest repayments: This is where you pay off the loan over, say, 30 years. Whereas, if you choose to pay only the interest, lenders usually have a higher interest rate.

There’s no need to worry if you don’t tick off all of the above criteria, as a good mortgage broker can find you a great deal.

Let me share the three secrets that can help you get the best mortgage deal.

Secret 1: Know which lenders will let you borrow

The lenders with the best possible interest rates are highly conservative. Many borrowers begin comparing loans, but they don’t know which lenders will approve them. So they end up wasting a lot of time or risk being declined. So the first step is to consider lenders that can approve your loan, which a mortgage broker can figure out for you quickly. Most of the time, it’s nearly impossible to do on your own.

Secret 2: Know your needs and compare them

Usually, people have specific needs aside from price. The cheapest interest rate may not be the best fit for your needs. For example, you may require:

• A quick approval because you’ve found your dream home
• A small deposit
• A lender that will allow you to borrow more
• Flexibility to make extra repayments. For example, if you want to make extra repayments or sell your property, then a fixed-rate loan is usually unsuitable for you.

So the second step is to know your needs and make sure the lender you choose meets them.

Secret 3: Know the total cost of the loan

The interest rate is just one thing that affects the cost of your loan. There’s a range of other expenses:

Lenders Mortgage Insurance (LMI) – If you borrow more than 80% of the property value, the lender usually insures the loan. This is quite expensive, and you need to pay for it. It’s a one-off fee when you get the loan. For example:

• If you buy a property for $500,000 and borrow 95%, LMI is about $15,000.
• If you buy a property for $1,000,000 and borrow 95%, it’s about $40,000.

The cost of LMI varies among banks! But they don’t tell you this and there’s little information online to help you compare lenders.

There are a lot of nuances to the cost of LMI.

• For most lenders, it increases dramatically when you borrow over $300,000, then again at $500,000 and finally at $1 million. So if you are borrowing just over these amounts, you can often reduce your loan size by a few thousand dollars and save a fortune.
• It also increases dramatically when you borrow over 90% of the property value. So again, if you are considering borrowing 91%, you may want to put together a slightly larger deposit to save a lot of money.

Fees – Often, lenders have a professional package fee, which is about $400 a year.

Interest rate – And of course, the best way to ensure that you’re getting a competitive interest rate is by comparing the rates in the market.

The secret is to compare the loan’s total cost, including interest, LMI and fees, over about four years. This is because that’s how long most people tend to keep a home loan before they refinance or their needs change.

Inside tips for getting a better mortgage deal

• For small loans, fees are more important. Often, a basic loan is best for under $250,000 or so.
• For large loans, the interest rate is more critical and often, a professional package loan is best. Such loans cater to people borrowing a large amount of money, usually over $250,000.
• Sometimes, fixed rates are cheaper than variable rates – it depends on many things. For example, in 2020 and 2021, the government gave cheap funding to the banks, so fixed rates were much lower than variable rates.
• There are often special offers.
  • These might be cashbacks, where the lender gives you a few thousand dollars to get a loan with them.
  • Or it could be an unusually low rate.
  • These offers are typically available for only a few months.
• You can negotiate the rate. Not with every lender, but if you’re getting a loan with a bank, we as mortgage brokers can put in a pricing request and play them against one of their competitors.
• People in some professions get special deals. For example, they may be able to borrow more than 80% of the property value without paying LMI. Some examples of professions that get these types of offers are:
  • Doctors
  • Dentists
  • Pharmacists
  • Legal professionals
  • Accounting professionals
• Guarantor loans are a great option. Let’s say you have parents who own a property in Australia. Some lenders allow them to provide a limited guarantee secured on their property and then waive LMI on the loan. If you borrowed 95% on a $1 million property, this would save you about $40,000 in LMI. The banks will also give you a better interest rate, as they have more security. You don’t need a deposit, which means you can buy sooner. We cover this in more detail on the saving a deposit page.
• Speak to a mortgage broker 3-6 months before you get a loan. Most people have something about their current circumstances or history that a lender will view as a risk. If we look at your situation a few months before you plan to buy, we can let you know if there are any problems so you have time to make changes. This helps you qualify with more lenders and get the best possible deal. The lender pays mortgage brokers for doing the work that their staff would otherwise do, so in most cases, there’s no cost involved in using a mortgage broker.
• Get pre-approved – Most first-home buyers start looking at properties before they get pre-approval. The problem is that they find their dream home and then they’re in a race to get their loan. The cheapest lenders are sometimes slow because lots of other people are applying for loans with them, too. In some cases, they can take a month or more, which means that you’ll miss out on your dream home if you apply with them. If you get pre-approved, you can get the best deal and act quickly after finding the right property.

Get the best mortgage deal today!

In summary, the secrets to getting the best loan include:

• Know which lenders will approve your loan.
• Know your needs and compare loans that meet those needs.
• Compare the total cost of the loan, including interest, fees and LMI.

We’re mortgage brokers and if you’d like our assistance, call us on 1300 889 743 or complete our free no-obligation assessment form.