October 29, 2021 by Robert Causovski
With interest rates so low and houses appreciating at record speed, not enough homeowners shop around for a better deal on their home loan. They’re potentially missing out on saving thousands of dollars over the lifetime of their loan.
Many homeowners are scrambling to refinance their mortgage, looking for a better deal and some are even looking unlock equity to invest in a second property.
Engageing a mortgage broker to help you determine whether it is worth switching to a different lender is the first step. A mortgage broker or home loan expert is often the most cost-effective way to secure a home loan or refinance an existing one.
For those who are a little bit nervous or don't know where to start, we always recommend using a broker. It's a free service. They're paid by the banks, but there's a best interest duty, which means they work for you, not for the bank.
More than guiding home buyers through the home loan process and assisting with paperwork, brokers are skilled at securing negotiated interest rates.
Mortgage brokers will have access to a panel of lenders, typically over 20 or so in the market. They could offer more than a one per cent discount, which can be tens of thousands of dollars over the life of the loan. They will also know who's offering cashback's for refinancing.
But here's the thing: Surprising numbers of consumers don't bother to shop for a better mortgage, even though they could save tens of thousands of dollars through lower interest payments. It's odd behaviour when you consider the number of hours spent trawling online and real-life stores to find the best deal when it comes to almost every other consumer item, like flights, phone plans, clothing and electronics.
If you haven't checked your home loan over the past 12-18 months, shopping around for a better deal is absolutely worth doing. It's an incredibly competitive market out there. And in particular, we've seen some big changes in the rates that banks and lenders are offering off the back of a lot of the stimulus that came through in the COVID period around March last year.
Smart borrowers' save almost one whole percentage point if they engage a broker to refinance in today's market.
The average loan in Australia is around the $400,000 mark; the difference between paying 3.5% and 2.5% equates to about $2,500 a year. You add that up over the life of the loan, and you're talking about tens of thousands of dollars of savings just for spending that small amount of time to refinance.
That is no small change.
A few minutes of work can save you thousands of dollars, whether that's by renegotiating or restructuring with your existing bank or moving to another one. If people knew how easy it was, I think there'd be less inertia in the market, and more people would do it.
Banks are notoriously known for the 'loyalty tax', offering great rates to new customers and not their existing ones. Sadly, loyalty does not pay.
And so if you haven't reviewed your rate, it's really important that you do so because there have been some big shifts in the market.
Bottom line: if you don't ask, you don't get.
