Ok, it might not be on everyone Christmas list, but for those that are prepared to shop around this Christmas and refinance their home loans, the savings could be worth it.
I am in the process of helping some clients with a young family refinance their home loan from one of the big 4 banks to a well known second tier lender. The savings in loan repayments each year, will be enough to cover not only this years Christmas presents but probably the next couple.
These clients had initially contacted their current bank to ask for a better rate as they had been with them and loyal for the last 5 plus years, which is a common thing to do and a great starting pint. This big 4 bank (who shall remain anonymous) came back to them and discounted their home loan rate only marginally. It wasn’t until this bank received the signed discharge authority that this bank offered them a further discount which was too late and they were still not able to match the interest rate offered by the new lender.
After reviewing this particular clients entire financial situation and existing loans I presented them with some loan options. They were surprised to find out how much that they could save by refinancing. We looked at refinancing their current home loan, a saving of approximately $350 per month and a small personal loan, a saving of about $400 per month. This is a great outcome for the client. It’s fairly common these days to save clients between $2,000 -$5,000 a year in loan repayments just by refinancing in this super competitive environment.
A lot of people are put off by refinancing because they put it into the too hard basket or not sure who to go to for advice. These days mortgage brokers like myself write over 50% of all new home loans in Australia. We have access to all the major banks and non banks. Most brokers do not charge a fee for their service as they are remunerated by the bank they introduce you to. They also handle the entire loan process for you and make it as easy as possible, like meeting you outside business hours and also visiting you at your own home for added convenience.
The greatest advantage of being a mortgage broker is choice. Unlike a banks that only have access their own products and set of credit policies, brokers can help show you what’s available across a wide range of lenders.
Some clients may go to their current bank direct via their branch network and negotiate what they feel is a great deal. They then go see a broker who shops around and presents them with some options. In some cases the broker can get them a better deal than what was initially offered by the same bank the client went to direct. Banks are there to make money and they generally won’t give you the best deal in order to protect margins or unless they are competing against a mortgage broker. Mortgage brokers help drive competition amongst the lenders and are ultimately are trying get you the best outcome whether it be based on interest rates or product features.
I have been operating my own mortgage broking business since 2006 and I have never seen the home loan market as competitive as it is right now.
Previously, you would have needed to borrow in excess of $2,000,000 dollars a couple of years ago to get the interest rate discounts currently being offered. In addition the second tier and non bank lenders are providing great alternatives to the big 4 banks that have largely dominated the market the previous years. Some lenders are enticing borrowers to refinance their home loans with cash back incentives up to $2,000 and some are waiving the annoying annual package fees.
To get yourself a new mortgage this Christmas, speak with your mortgage broker to see how much you can potentially save. If you need some assistance or currently don’t have a mortgage broker, please contact us and we will get in touch and happily help you out.
Theo Angelopoulos is the Director and Founder of The Loans Analyst. A boutique mortgage broking advice firm based in the Sydney CBD that helps clients to buy property and those wanting to refinance or consolidate their home loan.