higher salary - lower rate
30 September 2008

Question:
Can I re-negotiate the interest on my home loan if I am now earning a fair amount more than when I first applied?   I have read something like this before, but when I ask at the bank they look at me like I am mad.

Answer:
Of course you can renegotiate your home loan interest rate!

However, getting a salary increase is not the only criteria a bank uses to assess whether you qualify for a reduction. You need to have a long-term track record of paying your installments on time and your overall credit record must be good. They will not reduce your rate if you have fallen behind at any stage or received a negative rating on another loan.   They may also decline if they see you have incurred a lot of other debt since the inception of your home loan. The better credit risk you are the better rate you will achieve.

As all the advertisements offering better rates and free switching attest many banks as well as mortgage brokers are looking for your business. There is no harm in asking them for a quote. Armed with the quote you can then go back to your bank and renegotiate. They will be keen to keep you as a customer and will, at the very least, try to equal any other offer.

Do not phone the call centre and speak to the operators, they do not have the authority or the knowledge to deal with this kind of query. Insist on speaking to someone in management. It may take some effort on your part as they really don’t want to deal with this kind of request. Be strong your efforts will be worth it.

Iona Minton,  http://personalfinance.iafrica.com