Published on April 7, 2016 3:11 pm, by Jen Bakker
It’s too easy to set and forget your mortgage. Sign the papers, set up the payments and move on to more fun stuff like living your life. While this may mean that you manage to pay your loan off during the agreed term, it’s also possible to shave a few years off by knowing what to look for.
Negotiate. Give your bank a call and ask them if they will negotiate on your rate. Check out what the other banks are offering and see whether you are able to get your bank to match this or reduce your current rate. Often banks often offer their best rates to new customers to get them in the door, however retaining existing clients is also important. For you, a 0.25% decrease can make a difference.
Understand the market. Banks want your business. There are many enticing rates and products on offer for new clients. Keep an eye on Canstar which is a great site for comparing rates and products. Work out the cost to change banks and how much you will save. Use this information to negotiate.
Banks will often offer you a cash rebate to move across to them, and this can fully or partially offset your refinancing costs. You are in a better position to negotiate if your debt is less than 80% of the value of your property as changing lenders otherwise can be costly with additional mortgage insurance premiums payable with the new lender.
Know the tricks. Fortnightly & weekly payments mean that you can sneak some extra payments in during the year. If you have additional funds that you still want to access, put them in an offset or redraw facility. As a rule of thumb pay off unsecured debt and owner occupied debt before investment debt.
Make sure your banking structure is right for you. Do you know what an offset account is and how to get the best out of it? Are you paying principal and interest or interest only? Do you have more than one type of mortgage? What are your rates? If you can pay extra, are you paying it in to the account with the highest interest rate?
Check your statements. Make sure that you haven’t been charged additional fees and your interest looks reasonable. Just the act of checking your statements can remind you to look for ways to put extra money in.
Know the ancillary benefits. Many banks and financial institutions offer other benefits to their mortgage clients. Know what they are. You may be entitled to a waiver of your annual credit card fee. If your provider offers insurance they may offer a discount. If you have other bank accounts, fees may be waived.
And the top tip that Terry Christo from Loan Market shared is to review your mortgage every year or 2 with your broker or personal banker. Your broker will know the best deal for you if you are seriously thinking about moving institutions. If you want to stay where you are, both your banker and broker may be able to assist with a more suitable rate or package.
Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.