Puzzle Finance Blog


Home loans – how to save thousands


Giving your mortgage the once-over could save you thousands of dollars.

Switching to a cheaper lender or even renegotiating with your own may sound like hard work but just a 25 basis point saving – or one-quarter of a per cent – could shave $18,000 off a typical mortgage by the time it is paid off.

Even a 10 basis point reduction – which can often be achieved by calling your current lender and asking for a better deal – could save you a handy $7000 off an average $300,000 loan over its lifespan.

Michelle Hutchison, spokeswoman for loan comparison website Rate City, says advertised variable rates vary by nearly 2 per cent between lenders.

"We're seeing a bigger disparity between what lenders are offering because they're passing on different amounts of rate cuts ... than the Reserve Bank," she says.

"You really need to keep track of what your lender is offering you, how much you're paying in interest and compare it to the rest of the market to make sure you're getting a fair deal. It's a good idea to do this once a year at least."

Although some lenders offer attractive introductory rates, Hutchison says borrowers are usually better off going for the lowest ongoing rate that they can find (in a loan that has the features they need) as the sweeter-looking deals will revert to a higher interest once the honeymoon period is over.

When shopping for loans, it is important to look at comparison rates, and not just the headline rates.

The comparison rate bundles interest, fees and charges together and expresses them as a single percentage to allow borrowers to better compare loans.

If you find a good deal in the market, it's worth asking your existing lender if they can improve their offering before deciding  to switch.

"Because of this slower lending environment ... retaining customers is really important at the moment," says Hutchison.

Some simple online research can put borrowers in the bargaining seat.

It's not all good news though – depending on your situation, refinancing may not save you money, even if you can find a better ongoing rate with your desired loan features, such as redraw and offset.

"If you have less than 20 per cent equity, you're likely to have to pay for lenders mortgage insurance on your new loan because ... unfortunately it's not portable," says Hutchison.

"You may have to wait until you build up more equity. And you also need to aware of upfront fees and potentially some small fees to close your existing loan. You're looking at around, on average, about $1000 for fees to switch to a new loan. "

Hutchison says about one-third of all home loans financed each month over the past year were refinanced loans.

"This excludes loans refinanced within the same institution so the number of borrowers refinancing is likely even greater," she says.

Banking reforms have played a significant part in helping to make it easier for borrowers to switch between lenders by banning early exit fees on variable home loans taken out after July 1 2011, Hutchison says.

Posted by Carolyn Boyd - Domain (The Age) on 15th January, 2013 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=26587964


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word each here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)