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When applying for a home loan, it pays to do your research, especially when it comes to interest rates.

When applying for a home loan, it pays to do your research, especially when it comes to interest rates. 

Variable and fixed interest rates vary significantly and could affect how much you can save on your mortgage. With the RBA keeping the cash rate on hold for its 11th consecutive month, many lenders are offering all time low fixed and variable interest rate home loans.

Fixed interest rates are offered by lenders on the basis that the lender can expect a guaranteed rate of return on their money. For borrowers fixed rates are often chosen to either provide reassurance that repayments won’t change for a period of time or, to try to beat the market and enjoy a lower rate than the variable. One of the limitations with fixing your loan is if you change your mind or have to sell the property, and toned to break your fixed rate loan term, then you could be looking at paying hefty fixed rate break costs. Generally speaking, if variable interest rates continue to drop below your fixed rate, then getting out will prove expensive, especially if there is a lengthy duration remaining on the loan term. There can be other limitations with fixed rate loans like the inability to pay extra, redraw or link offset accounts so understanding what you are getting is important. 

Variable rates tend to be more flexible as many lenders offer money-saving features such as offset accounts and unlimited extra repayments with these loans.. If there are no early exit fees, variable rates can leave you free to sell your property, move states or refinance to a cheaper rate. 

No matter which type of loan you prefer, there is potential for borrowers to save on a home loan by being proactive. Don’t just accept the  interest rate from your existing lender or even a couple of major lenders.,, The home loan market is extremely competitive so it is worth it for you to know how to negotiate with your current lender or where to go to find a better deal.

If you are considering refinancing or want to negotiate with your lender, take a look at our Top 5 Tips and see how you can save:

Do your research– Use comparison websites such as ratecity.com.au or canstar.com.au. These will allow you to compare hundreds of home loans with ease.

Ask your lender for a rate cut- Once you have information about other loans from competing lenders, compare the rates. If you’re paying significantly higher interest rates, take this information to your lender and ask for a rate reduction.

Can’t get a rate cut? Try negotiating fees- Even if your lender is unable to reduce the interest rate, many of the major banks and lenders have the flexibility to waive certain fees.

Refinance for a better rate- The ban on exit fees for new loans has made refinancing much easier. Consider setting up a new loan with another lender to get better rates.

Refinance for better loan features– When refinancing you should also consider the various loan features available – with the right combination of features you will pay a lot less interest over the life of the loan. Features worth considering include redraw facilities, offset accounts and reduced fees on transaction activity.