How you can stay satisfied with your home loan?
Updated: May 15, 2019
We are constantly bombarded by media and advertising about cheap loans and making sure you have the lowest rate. We are now seeing a wave of Fintech wannabe's telling you they will get you the lowest, cheapest, best rate available!
So when is the lowest rate not the best rate??
Well, what many of these banks and financiers are not telling their potential customers is that these rates, many a time, come with risks. Risks that your new bank or provider will only meet your needs of a cheap home loan for the first few months or a couple of years before they can no longer meet your other needs and it will come at a cost!
There is detailed research and studies that have shown the price, although important, is generally not the main reason for consumers to purchase a product, especially financial products. So why then do we let rates and price hijack the conversation when it comes to borrowing?
Many might say that its because buying property will be one of, if not the biggest investment in your life, others know how much emotion is attached to the dream, while many just love to hate the banks!
The elephant in the room is that over the last 18 months we have seen a significant overhaul in the bank's risk appetites with APRA and ASIC legislating changes that have affected the banks ability to increase sales via a come one come all approach. Many will know foreign income earners, investors, interest only repayment makers and many more have been targeted to reduce the potential risks in the property market as well as the risks around potential for increase in defaults as some borrowers will struggle after gorging themselves with debt over the last decade.
So why can't I have cheap and good loan, well maybe you can, if you or your broker does the hard yards and look at your longer term strategy and structural needs. But unfortunately many just won't do the work or take the time.
Now I'm stuck!
Working with your bank should be treated like any new relationship, and not just like buying a loaf of bread. You and your new bank need to understand each other. This means your new bank will want more information about you than ever to be comfortable with lending you money, but more importantly you need to understand your banks appetite to do business with you today and more importantly in the future.
Banks will let you know when they change their rates (by law) but they don't let you know when they change their Retail Credit Policies. So why should I care? Well with 100's of changes in the last year alone here are some examples of what has happened
You borrow over 80% and have paid Lenders Mortgage Insurance at bank A and you then in a years time what to buy an investment property but bank A has changed their serving calculator and does not have an appetite for investors you may need to change banks now to get finance, but you will pay LMI again at bank B. Bank A may have been closed to investors when you first went with them but you did not know and did not ask. We have seen clients have to pay up to $40k in LMI again as their Bank A could no longer meet the client's needs.What about when you sell your home and what keep your fixed rated as you have purchase a new home, but your bank does not take cash as security and makes you break your fixed rate loan and pay a massive fee!!You went to bank A because of the cheap 1st year rate but in year two and three they put you bank on the standard variable rate with no discount and you are now paying 1.5% more than the average borrower. You also have no infrastructure, ATMs, poor quality net banking, but you did have a cheap loan for a year!!!
There are hundreds of examples we see everyday about why is it critical that your investment strategies will always work better when your loan has a strategy too!
In an age of information we are overwhelmed with it all and can only digest so much. So make sure you don't get lost the in the marketing and appeal of just a CHEAP loan. Book in a time to see Australia's number 1 Brokerage to look at your needs to fine a strategy and structure that suits you and not just your bank.