Think big – Mozo advise how to maximise your loan

Be prepared, present well and be ready to bargain to make the most of your investment opportunity

Many investors want the biggest loan they can reasonably afford, and there are some clever ways to maximise this opportunity.

By doing your research and knowing what the best rate on the market is, you put yourself in the best bargaining position when you deal with your lender.

“The more research you do, the better informed you will be,” said Marie Mortimer, managing director of loans.com.au.

“Watch what different parts of the mortgage market are doing; for example, what are non-bank lenders offering compared to the big banks?

“Online lenders are experts at keeping costs down that are passed on to customers as low interest rates and low fees. Do the sums and don’t be afraid to look outside the conventional bricks and mortar lending model for a better deal.”

There are certain aspects of your finances that banks look at to determine how much they will let you borrow.

“A strong repayment history, substantial property equity, a co-borrower or guarantor, and demonstrated capacity to meet repayments will help you maximise the amount you can borrow,” says Mortimer.

Once you’ve identified the right loan and made sure that your finances are in order, the next step is to maximise the opportunity.

“Investors often want to be able to borrow the most that they possibly can,” says Kirsty Lamont, a director at mortgage comparison website Mozo.com.au. But it’s also important to ensure that you can meet future repayments.

“There are ways to go about maximising how much you can borrow. For instance if you take out a fixed rate loan, banks will calculate your borrowing capacity on the fixed term, e.g. 4 per cent for five years, whereas if you get a variable loan they will add a serviceability buffer of around 2 per cent to the current rate to determine your borrowing capacity.

When you’re looking at maximising your loan, it’s still very important to make sure you’ve done your own affordability calculations and are comfortable that you will still be able to afford those repayments down the track if interest rates rise.”

Many people don’t know that you can negotiate with a lender and by doing so you can often get a much better deal.

“A lot of us are used to the idea of walking into an electrical store and haggling a better deal for a TV, but we don’t feel comfortable haggling on an interest rate when it comes to a home loan,” says Lamont.

“But the banks are very willing to negotiate and it’s not uncommon to save yourself up to 1.2 percentage points by haggling.”

In a Mozo Mystery Shopper experiment, an expert negotiator was sent into ANZ, Commonwealth Bank, NAB and Westpac, posing as a refinancer, a first home buyer and an investor. The results showed that even first home buyers borrowing relatively small amounts could negotiate up to 1 per cent off their interest rates. The experiment also showed that the banks have different levels of discounts and tend to reserve their biggest discounts for people that bargain the hardest.

“Don’t accept the first rate that they offer you, bargain again because they have a range of discount tiers they can access and they won’t necessarily offer you their best discount straight up,” advises Lamont.

“Tell them to try again and say they are going to have to do better to win your business and often times they come in with an even bigger discount.”

Lamont says that many Australians feel uncomfortable negotiating over a complicated issue like a home loan, or assume that the lenders have all the power.

“But in the current competitive home loans climate they want your business and will bargain with you,” said Lamont.

For information on property loans, rates and more, visit Mozo.com.au or click here for the free Property Observer eBook, Get loan-savvy – tips for a first time, investment or refinancing loan, which helps you decide on a home loan that meets your requirements.