The banks now make it easy to refix your home loan with the click of a button, but should you use this method?
We say NO, and here’s a good reason why we say that.
This week we contacted a couple whom we had arranged a home loan for last year as one of their loans was coming to the end of the fixed term. They had a total home loan of $880,000 and had split it into two loans of $440,000 each with one loan fixed for 1-year and the other for 2-years.
We contacted the clients on Monday to get the authority needed for the bank, and contacted the bank (with the authority) on Tuesday and negotiated the home loan interest rates for this couple. Unbeknown to us the clients decided it was easier for them to arrange the refix directly with the bank.
We Negotiated The Home Loan Interest Rates
Initially we were provided the home loan interest rates by the bank, but they were not as competitive as we believed they needed to be. Often the rates that a bank will offer are ‘okay’ but not always the best that they can offer, so as is often the case we pushed back and asked them to have another look at what they can offer.
They did come back on Wednesday with more competitive rates and we provided those to our clients to review. As we had not heard back, I followed up with our clients on Friday only to be told that they had already refixed directly with the bank.
When I checked back with the bank they confirmed that the clients had refixed for 18-months at 4.10% which was a discounted rate from the advertised rate of 4.25%
I believe that the bank may have provided the discounted rate and that the clients thought that was a good deal; however we had negotiated a lower fixed rate of 3.95% and we wanted the bank to honour that for our clients. The loan was now at just over $430,000 so the extra discount would save our clients about $1,000
In the big picture some people might say $1,000 is not a lot of money; however if the bank was doing this to every one of their customers then it would certainly add up to a whole lot of money!
A Good Result!
When you are refixing your home loans we would always suggest that you avoid any “simple” one click option. We know that the banks are trying to get all customers to use these methods as they can automate that process and that has a cost saving for the banks; however you are then getting the standard rates (maybe a standard special rate) that the bank is offering rather than a negotiated special rate.
Of course we would suggest that you engage an adviser to help get the best rates.
As we have shown in this example it can help to use an adviser, but we should also point out a few of the key reasons to get an adviser to help with refixing your home loan.
Firstly, the adviser gets paid by the banks so there is no charge to you.
The adviser knows what other banks are offering, so can push back if your bank is not competitive and in many cases the bank will improve what they offer.
An adviser can help reviewing other debts, and even arrange to consolidate more expensive debts into your home loan if appropriate.
Advisers can offer advice on loan structures too – they may suggest changes or at least can have a discussion with you to ensure that you are happy with what you have.
You may want advice on how to pay your mortgage off faster – it’s something that advisers are passionate about as it can save you a huge amount over time.
There is really nothing negative about having a mortgage adviser work for you when refixing your home loan.
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