How to negotiate home loans like a pro

Written by in Finance

negotiate home loans

For some people negotiating a new home loan deal comes about as naturally as busting out the cha cha in front of a room full of dance critics. So it’s fair to say just picking up the phone to try and get a better interest rate from a lender, doesn’t come easily to some. Even if it could save them tens of thousands of dollars over the life of the loan, there’s a fear within that stops people from making the call.

Aside from resorting to any untoward tactics, the three best tools for negotiating are knowledge, power and confidence. They also happen to be the most common roadblocks for people who want a better home loan rate. Some believe the person on the other end of the phone will out-negotiate them, but the reality could be completely different if you do a little preparation work before talking to your lender.

The keys to mortgage loan negotiation


You may get disheartened when you find out other lenders are offering better interest rates than you’re currently paying, or when your lender is offering a lower interest rate to other customers. It’s like putting an offer on your dream home only to find out the home went to another bidder.  It just doesn’t seem fair, does it?!?! But instead of cursing your luck and accepting it, this should be seen as an opportunity to enter into negotiations. If you think you can get a better deal with your current lender, do some market research and find out what other financial institutions are offering their customers. If you try and enter into negotiations without understanding the market, it’s going to be very difficult to clearly articulate what sort of discount you want and why you think you deserve it.


Even though it’s the lender who has the money, you still have an enormous amount of power. It is far easier for a lender to keep a customer than find a new one, so chances are you’re holding more aces than you think. In the long run, even with an interest rate drop, they’re still going to make money from the interest you pay on your loan repayments. As long as you’ve been a good customer, they will fight hard to keep you on board.

Knowing what other lenders are offering is the key, so don’t be afraid to mention these figures and how attractive they are to you. Tell them you are exploring your options, and at the end of the day you just want to get a rate that you’re happy with. Negotiations should never be aggressive, the point is to find a common ground where the relationship is even stronger by the time you hang up the phone. It’s like a marriage, you share a beautiful bouncing loan and you both want what’s best for it so you’ll need to work at it. Find some common ground, and maintain the relationship until the loan grows up and leaves the nest.


The best negotiators have a certain confidence about them. Not Kanye West-style confidence. More like that feeling you get when you’ve done your research and you’re well prepared. Even if your knowledge isn’t as strong as the other party,  confidence can give you a genuine edge. But don’t mistake confidence for bullying, that simply won’t work.

You’re about to negotiate with a professional who takes calls from people wanting to lower their interest rates every day. Making demands from the outset with fire in your tone isn’t going to get you anywhere. Remember, both parties in any negotiation want a positive outcome. In this instance you want a lower interest rate, and they want to keep you as a customer. Focus on the outcome you’re looking for and be reasonable in your requests. Listen to what lenders have to say and keep discussions cordial.

What to do if the lender won’t lower their rate

Research the market so that you understand the power you have. Approach your mortgage loan negotiations with confidence. You will give yourself every opportunity to secure the interest rate reduction you’re looking for. If at the end of the negotiations you’re happy with the result, then you can consider your negotiations a success.

However, not all negotiations go according to plan and you may end the conversation disappointed. But before hanging up on your lender, get as much information as possible about why they refused your request. Have you made your loan repayments on time, every time? Do they believe you’re already on a competitive rate? Is there something in your credit file that makes you a risky customer? Any information you can gather will be invaluable when determining if you should switch lenders or not.

Now you have a decision to make. Do you stay with your current lender, or do you seek the services of a mortgage broker? Remember they can help secure the best loan given your current circumstances. You will need to weigh up the potential costs of exiting your current loan agreement with how much you are going to save in repayments. Changing lenders doesn’t have to be a complicated process, and the potential long-term savings can be substantial.

Author: Positive Home Loans are an expert mortgage broker who believe in giving Australians a chance at home ownership with loan products tailored to each individual’s specific financial situation.

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