Five considerations when your variable interest rate increases
If your bank or lender has recently increased your variable home loan interest rate, you may be wondering what you can do about it.
For homeowners and investors across Sydney and the Northern Beaches, a rate increase can add hundreds or even thousands of dollars to your annual interest bill. However, you don’t necessarily need to accept your lender’s new rate without question.
Here are five things worth doing when your variable interest rate increases.
1. Ask your lender for a better rate
The first step is often the simplest, ask your lender to review your interest rate.
Lenders can sometimes offer existing customers a better rate, particularly if your loan has a strong loan to value ration (LVR), your repayment history is good and you’re able to demonstrate that competitive rates are available elsewhere.
Before considering refinancing, ask your lender whether they can improve your current pricing.
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2. Compare your rate with the market
Don’t assume that because your lender has increased its rates, every lender has made the same change.
It’s worth comparing your current rate with similar home loan products available from other lenders.
The rate you may be eligible for will depend on factors such as your:
- Loan amount
- Loan to value ratio (LVR)
- Owner-occupied or investment loan product
- Principal and interest or interest-only repayments
- Loan features and package
3. Check your current Loan to Value Ratio (LVR)
Your financial position may have changed since you first took out your mortgage.
If your property has increased in value and/or you’ve reduced your loan balance, your LVR may now be lower. This can potentially give you access to better home loan pricing.
For homeowners and investors in Sydney and the Northern Beaches, where property values can vary significantly between suburbs, an updated property valuation may be worth considering when reviewing your home loan.
4. Don’t refinance purely for a lower interest rate
A lower interest rate doesn’t automatically mean refinancing is the right option. Before switching lenders, you should consider the following:
- Refinancing costs and fees
- Your current loan features
- Offset and redraw facilities
- Your remaining loan term
- Any changes to your loan structure
- If the interest savings justify the costs of switching
Sometimes the best outcome is to negotiate a better rate with your existing lender rather than refinance.
5. Get your home loan reviewed
With lenders constantly changing their appetite and pricing, it’s easy for an existing home loan to become less competitive over time.
Allan Hall Finance can review your current loan, renegotiate with your current lender, compare it against available options and determine if it is worth staying with your existing lender or explore refinancing to another lender.
To see if your home loan is still competitive, get in touch with Allan Hall Finance for a free discussion.