Getting a home loan approved and repaying for one is a tough feat, even to those with good credit standing. Easier repayment scheme begins with getting a low mortgage rate approved on your application. Here are some tips you can follow to reduce your home loan rates and get the best deals possible for your mortgage.
Keep Your Credit Scores High
One of the perks of having a good credit standing is you get better deals in terms of loan interest rates. Most lenders will see your credit history as a roadmap of how are you in terms of your finances. Your credit history also reflect your creditworthiness as a person.
Approving and releasing a loan is a risk for most banks and financial institutions. Having a good credit score to attach together with your home loan application makes you less of a risk. To learn more about your credit scores and how it affects your home loan application, you can check out this article What Does My Credit Score Say About My Finances.
Consistent Work History
To repay a loan, you need to have a constant source of income. Thus, a long and consistent work history is a good sign for banks and non-conforming lenders to consider granting a home loan for you. The longer and the more steady your source of income is, the more likely you’ll have a better interest rate attached on your home loan repayment.
If you have multiple jobs in a short period of time, lenders might see you as someone unreliable in terms of repaying a loan. You might still get a loan, but the interest rates would not be that favorable and the loan amount you might get approved are lower, compared to an individual with a more consistent work history.
Know your Options
With a good credit score and a good work history on your belt, you have plenty of home loan options available out there. Get a home loan specialist to help you compare which bank or lender can offer you the cheapest possible mortgage available out there. It is very easy to compare interest nowadays, thanks to the help of the internet and loan specialists.
Ask Your Bank or Lender for a Better Rate
Loyal bank clients tends to get deals and better rates for loans from their bank – if they have the courage to ask. You might get a NO for an answer, but imagine getting a YES minus the expectations. There is nothing wrong with asking and hoping to get a better interest rate from your bank or lender.
Save for a Bigger Deposit
A bigger deposit will require you less money to borrow. A smaller loan amount is also equivalent to a lower interest rate and a shorter period of time to repay the loan. In Australia, paying for a downpayment lower than 20% of the total value of your property will require you to pay for Lenders Mortgage Insurance.
LMI is an additional amount you’ll have to shoulder in this scenario. Thus, paying for a 20% or more than 20% deposit will give you bigger savings in repaying for your home loan. You may not appreciate the amount of savings you’ll get at present, but in the long run, you’ll see thousands of savings in your loan interest if you apply this principle.
To compute how much your LMI will be, you can head to this post How to Use an LMI Calculator.
Get a Shorter Loan Term
The most common loan term for homes purchased in Australia is 30 years. However, banks and financial institutions provides incentives to applicants who commits to pay their mortgage in a shorter period. Taking out 10-year, 15-year or a shorter loan term reduces interest rates, thus reducing the total interest you’ll be required to pay on top of your actual home loan value.
Set Up Automatic Mortgage Payments
Some banks offers an interest rate discount if you set up your mortgage payments automatically from your bank account. Setting up automatic payments gives your bank or lender the assurance that you will never be late in paying for your mortgage. If you plan to close your account or change banks, be sure to update this with your mortgage lender to be able to set up a new automatic mortgage payment.
Refinance Your Mortgage
Refinancing an existing mortgage can help your reduce the current interest rate that you are paying for in your current loan. You can ask your mortgage specialist if the current interest rate prevailing in the market is lower than your current interest rate. To know more about refinancing a home loan, you can read this post How to Apply for a Refinance Home Loan for more details.