HOME loan customers are reveling in record-low interest rates but many could be missing out on nabbing rock-bottom deals by failing to pay attention.
The Reserve Bank of Australia has kept the cash rate on hold today at 1.5 percent — where it has sat since August last year — but there are five mortgage secrets every borrower should know to ensure they are not getting ripped off.
1. WHAT YOUR BORROWER DESPISES
Lenders do not want you to contact them, but it pays to phone up and ask to speak to the retention team so you can discuss your existing rate.
Banks love customers who are on “old rates” and are paying far more than they should.
So with a fluctuating mortgage market at the moment, for borrowers particularly owner-occupiers who are on variable deals, make sure you contact your lender every three to six months to see if you can get a further discount.
If you are an owner occupier with a loan-to-value ratio below 80 percent you should be on a deal below four percent.
2. THREATEN TO LEAVE
If your lender won’t budge on the deal you are getting now threaten to walk out.
Lenders will do anything they can to keep a customer because it costs them far more to get a new one through the door.Do some online research and find deals that are cheaper than your own and hit them with the rate offers you can get elsewhere.
3. ALWAYS PAY WEEKLY OR FORTNIGHTLY
It’s always surprising how many people don’t do this and stick to paying monthly which costs them more.
By making fortnightly repayments you will make 26 payments in a calendar year, compared to monthly where you will make just 12 repayments.So in short, you end up making more repayments in the calendar year by paying fortnightly or monthly and this will shave down your interest bills by tens of thousands over the life of the loan.
Try and align your repayments with when you get paid to lessen the burden when that chunk of cash is taken from your account.
4. MORTGAGE BROKERS
About half of all home loan customers use a mortgage broker to help sign up to a home loan deal.
Brokers can be extremely helpful and they usually don’t charge you to use them, instead, they earn their money via commissions direct from the lender in the form of an upfront commission and recurring commission.
But there’s a catch — there are some lenders that offer rock-bottom deals that are not available via mortgage brokers.
And there’s a reason for this — they are not paying commissions to brokers so a result that can offer cheaper deals.
So if you are using a mortgage broker it pays to find out which pool of lenders are in their network and see if you can save by going directly to the lender yourself.
5. LOAN TERMS
Choosing a loan term is critical and 30-year loan terms are the norm now.
But some lenders offer loan terms up to 40 years so be aware while your mortgage repayments will be lower because they are spread out over a longer term, this means you will pay much more in interest costs because of the longer loan duration.