Wednesday, 5 December 2012

Search for the lowest possible interest rate

Every 0.1% reduction in the interest rate you pay can have a dramatic difference over the life of the home loan due to compounding.  For example, for a $1 million loan over 20 years, the total repayment at 5.5% interest is $650,929, whereas at 5.4% it is $637,403 – a saving of $13,526.  So it pays to shop around and negotiate keenly.

Some suggestions to ensure you get the best possible interest rate include:
  1. Look at as many lenders’ websites as possible.  There are hundreds of lenders out there, so it may not be feasible for you to look at all of them, but it can be the key to finding the best possible rate.  One of my home loans was with a credit union, who at the time was not listed on the Canstar-type websites.  I found them by literally looking at every credit union in Australia’s website.  They offered the lowest interest rate I could find and provided fantastic service to boot.
  2. Regularly check rate research sites like Canstar, etc.  I’ll list a few in my mortgage resources post later in the month.  Note that these are paid advertisements, so they don’t include every product in the industry and certainly not always the lowest priced products.  But they do provide valuable insights for your decision-making process.