Changing your home loan is something many Australians are interested in doing, but feel nervous about. After all, home loans are a big commitment. Ideally the one you get for your first home is one you keep for the life of the loan. But sometimes things happen, for better or worse.
You may get a promotion and your income grows, or after the early years of a new bundle of joy, you or your partner return to full time work and see the household income soar.
On the other hand, sometimes you may find the market has changed and there’s a really tempting home loan on offer elsewhere, and you start to think it’s really time you renegotiate a deal.
Because home loans are big and complex processes it can feel a bit like quicksand, easy to get into but hard to get out of. So that’s why we’ve a guide for you here on how to vary your loan.
Get Professional Advice on Any New Loan
Home loan contracts are big documents. They are sure to be among the most important you ever sign in your life. If its a simple adjustment to your loan then you may not need to seek out advice beyond your own.
After all, with the average mortgage in Australia being around $400,000 there’s a lot of cash at stake when it comes to sorting a new home loan! So, it’s always a good move for your long-term future to pay a cheeky hundred or two for a professional review that could save you thousands in the long run.
There’s no suggestion your current lender won’t do the right thing for you by default, but it’s also a reality that Royal Commission into Financial Services has shown there’s has been some very naughty boys and girls working within the Aus finance sector lately. It’s wise then that any adjustment to a loan that comes with new terms and conditions is checked out by a third party.
Know What You Need
The best way to vary your loan is to have a clear-cut idea of what you need at the start. That way you can go into any new negotiations with your lender confident, and also ready to bat away any alternative offers or attempts to make you stay on the existing home loan.
At the same time, it’s really good to check out what some competitors to your current lender offer. If they are doing a better deal these days, you can take that to your current lender and ask them to lift your game.
If your present lender is still giving you the best deal available in the market – then while you certainly can still ask for a change to your loan – at least you’ll know if they’re unable to alter much then they are still delivering the best deal out there overall.
Ultimately, you’ve signed a contract with a lender for a home loan. So they have some leverage and an expectation you will honour it. At the same time, you also have the ability to exit the loan, and of course take your business elsewhere.
So if you want a change to your present loan and they won’t budge an inch? You can let them know you’re actively considering offers elsewhere. It is important to keep in mind as you go along that a discharge of an existing home loan will come with some fees. At the same time, these fees are not very big. It varies from lender to lender, but among the big four banks the most common amount is $350.
So if you find negotiations end up at the point where they say ‘OK, you can leave but you’ll have to pay exit fees’, keep in mind that big scary exit fee amount is the price of a new Xbox or 6 months worth of a gym membership. Exit fees are never fun, but they are not going to bankrupt you, even if some lenders think it’s a good scare tactic to run.
Need to Notify
Keep in mind as you go through this process that just as you’ve a right to seek out a new deal if circumstances change for the better, it’s also necessary to notify your lender if something has gone wrong. If you lose your job, or you and your partner break up, or anything else like that.
Even if this is not permanent – your partner may say they’re breaking up with you because you forgot their birthday but will forgive you before their next birthday – you still need to notify the bank. Failure to do so can get you in a world of trouble.
It’s important also to recall there is usually some flexibility in place from the lender. If financial hardship occurs they can come to an arrangement with you in the short term so you can focus on sorting out other areas of your life (like finding a new job) without worrying about coming up with the regular repayments.
One of the positive by products of the Royal Commission is the recognition by a whole ton of lenders they need to lift their game. That means treating customers with more respect and understanding.
By no means does this make up for the mistakes prior – and it’s also no guarantee they won’t be up to cheeky business again if not kept in line – but for now it means lenders know they’ve peeved off many people, and so are more open than before to going the extra mile for a customer.
So if a reason like this has you looking to vary your loan, you can actually take another path and simply ask your lender what provisions they have in place if someone encounters financial hardship. You may be able to come to a new arrangement without needing to permanently adjust your loan You loan can then return to ‘business as usual’ once you’re back on your feet.
Walk If They Won’t Talk
If you ultimately find you’re unable to arrange a new deal with your existing home loan provider, it’s best to put your current loan on ‘autopilot’ and just keep paying it. But as you do that, begin to actively seek out a new loan. That way you can sort a new loan with another lender, then circle back and tell your current lender you are going to switch, and that’s that.
Here’s where my team and I are always ready to help you.
Your Heroic New Journey
If you have used Hero Broker before, it simply a matter of getting back in touch with your lending manager that you used the first time.
I know it might have been some time and many emails ago since you last spoke with them.
If that’s the case you can just give us a call direct and once we’ve your verified your details we can reconnect you.
And what about if didn’t use Hero Broker for your first loan but want to now?
Well you’re in for a treat! Our platform is a custom made-to-order powerhouse created to ensure every Aussie who is applying for a new