Negotiating your home loan? Don't be sheepish!

When you consider not only the value of your home loan, but the added cost of all the interest that gets piled on top of it, taking the time to find the right home loan is time invested wisely.

When it comes to bargaining and negotiating, we Kiwi’s can be a little similar to our nocturnal namesakes – shy. Brokering deals on every day purchases isn’t a daily practise for us as it is in other parts of the world so we tend to be a little more hesitant – ‘sheepish’ if you will.

If you need a little extra motivation to bargain hunt for your home loan, consider these figures: if you borrow $350,000 over 30yrs at 5.65%, you will pay $377,000 in interest alone. As you can see, finding ways to cut a sweet deal on this magnitude of debt really is in your best interest.

So how can you make sure you are getting the best deal?

  • Do your homework. Make sure you’ve done your research before you commit to anything. Find out what interest rates are across a number of lenders, find any differences in fees, and put together what you need from a home loan. Even if your requirements are spread across a number of different lenders, packaging them together and approaching the lender you have the best relationship with is a great start. Knowing what is available across the board puts you in great stead.
  • Shop around. Finding the right deal may be as easy as finding the right home loan provider. The home loan process is tricky but it has also come a long way. There are a number of factors that make as attractive lender, and finding the lender that is most suited to you could make a huge differences to you and your finances.
  • Negotiate. While haggling over the price of organic veges at your weekend Farmers Market might not make a life changing difference to your cheque book, negotiating the best deal on your home loan could potentially save you thousands of dollars in interest and fees, money better spent well, anywhere really. Lenders make big money from what you borrow – believe me, they have room to negotiate, and the power to do so too.
  • Be prepared to hear ‘No’. While it’s not unheard of for banks to knock off up to 1% off interest rates, they don’t actually have to. They may not give in to everything you ask for – the key is to give yourself a little wiggle room. Don’t be discouraged by hearing ‘no’. Either renegotiate, or find a lender more willing to come to the party.
  • Be bold. Know what is a deal breaker, what is negotiable, and what you can happily forgo, and then ask away. Lenders have much more financial flexibility than you, due to their sheer size and traffic volume. It may not always be a case of ‘ask and you shall receive’ and it’s a little cliché but we all know it – if you don’t ask, the answer will always be no.

Remember that there is more than one aspect to a ‘good’ home loan deal – interest rates, loan term and structure, payment terms – all of these factors need to be considered so make sure you fill out all the blanks before you decide

This is one of those processes where a little extra time spent and caution taken should translate directly into savings for you. While becoming a home owner is likely a lifelong commitment, a home loan should be working just as hard for you as you are.