Home loan rates are pretty low at the moment but could you be getting an even better deal by being the ideal borrower?

The Reserve Bank is expected to keep the official cash rate on hold today but that doesn't mean you can't cut your own mortgage rate.

Loan Market mortgage broker Bruce Patten says there are three factors banks look closely at when sizing you up as a mortgage-holder - credit history, equity or deposit and income.

Liam Dann: Confused about where rates are going? You should be
Chinese buyers coming back to Auckland property market
Adults kids putting pressure on over 50s saving for retirement


And people who score highly can use their desirability to shop around and shave the advertised rates by as much as 0.7 of a percentage point depending on how much you borrow.

That could save you around $5800 over two years on a $500,000 30 year mortgage.

Income is important as there is now an onus on all lenders to lend responsibly - so if the bank believes you can't afford the repayments they won't or shouldn't lend the money to you.

Patten says people sometimes have unrealistic expectations when it comes to how much they believe they can repay.

"Some people do try to push themselves too far - inevitably they are the ones that come unstuck."

He says it's toughest for young couples who are having to borrow a lot to get on the property ladder in Auckland.

"On the plus side their incomes will go up over time and it will get easier."

Patten said generally people should not borrow more than five to six times their income.
"That's the typical maximum assuming you don't have any other debt."


But four to five times income is more manageable.

"Five to six is a stretch."

Patten says those wanting to put their best foot forward should also make sure they have a budget which shows what their money is spent on.

I sit there with a lot of people and ask how much is your power bill? And they say they don't know.

People with an itemised budget are more likely to be lent more money, he said.

Credit history
Patten said one area people could control was their credit history.

"If you miss a payment on your power bill it is now on your history."

And it remains on your history for five years.

Patten said those worried about a past default should check their credit record and be upfront with the potential lender.

"It's much better front footing it with the bank so they don't come back to you."

Jeff Royle a broker with iLender said a default may be looked upon more kindly if it is non-financial such as an unpaid gym membership or cell phone contract.

"If it's under $1000 and you have a reasonable explanation and it's a one off..."

But he said others defaults were not so easily overlooked.

"There is no excuse for not paying a power bill. The onus is on you to make sure you pay it."

Financial defaults such as not paying your credit card bill, finance company loan or pay-day loan were considered to be more serious, he said

"The chances are the bank will say no."

Banks will also frown on unarranged overdrafts and bounced cheques which incur fees.

Royle said lenders typically paid close attention to the last six months of account history so if you're planning on buying a house make sure you straighten up your act when it comes to your bank statements and don't take out that GE loan for the flat screen tv you want.

"It's all about financial discipline."

Royle said banks also liked to see renters whose mortgage payments would be at a similar level to their rental costs.

"If you are at home with mum and dad and paying $200 a week in board and you take on a $2000 a month mortgage that raises alarms."

Royle said an ideal first home borrower had at least a 20 per cent deposit and a savings track record to show how you accumulated that money.

Minimal debt elsewhere and stable employment of at least two years were also attractive.

For investors Patten said a much higher equity level was needed as that equity would then be split across the properties.

"It needs to be 40 per cent to make it doable."

What's it worth?
Patten said often the rate discount depended on how much a person was borrowing.

"If it's a small amount - say 170k you might only be able to convince the bank to shave 0.1 of a percentage point off the advertised rate.

"But if it's a million dollars you could be looking at 0.7 per cent."

Patten said there was no set amount and it really varied with the borrower.

"It's depends on the desirability of the client - are they are professional, what's their likely future borrowing?"

It may also depend on how much business that mortgage adviser does with that particular lender.

Shop around but don't be afraid to take the best deal you can find back to your existing bank.

Patten said in his experience eight out 10 times the existing bank would match it.