Gem 1: Haggling is an option.
Most people don’t think of negotiating a better deal when it comes to mortgage fees and interest rates. For some reason we tend to believe they are carved in stone. Like any business after a profit, the banks are willing to negotiate. They would prefer to have your business at a reduced profit then see you go to one of there competitors. A little profit is better then none at all.
A smart borrower will use this to their advantage. Simply ask for a discount on your interest rate or loan fees. Even the tiniest reduction can make a big difference in the long run.
Gem 2: The biggest saving is in the interest rate.
A lot of people get sidetracked by all the extra options available when picking a home loan. Some extras do provide clever ways to pay your loan off faster and save a lot of money. However, by far, the most important feature of a home loan is the interest rate. Having a lower interest rate can mean huge savings over the life of the loan.
For example:
Someone borrowing $212,000 at 7.32% for a 25 year term will pay back $462,536 over the life of the loan.
Now imagine the same loan except this time at an interest rate of 6.70%. The total amount paid back by the end of the loan is $436,963.
That’s a saving of $25,573, a substantial and rewarding difference for securing a lower interest rate.
Gem 3: Ignore the fees at your peril.
As previously stated, the interest rate is the most important aspect of a loan. That, however, doesn’t mean you can ignore the fees. Everything from account keeping fees, redraw fees and break fees need to be added up. They do make a difference.
When comparing loans make sure you get the Annual Percentage Rate (ARP). This rate shows you the real cost of a home loan by taking into consideration all the foreseeable fees and charges associated with the loan.
A low interest rate loan with hefty fees can end up costing you more then a loan with a slightly higher interest rate and low fees. Don’t get caught out.
Gem 4: Mortgage reduction schemes can cost you big.
Mortgage reduction schemes have come into the home loan market more as a marketing and profit tool for the lenders and brokers then for the benefit of the borrowers. Some charge ridiculous upfront and ongoing fees, and in the end have little or no benefit for the buyer.
Most rely on sophisticated software to promote line of credit or all in one transaction accounts, with predicted savings based on unreliable assumptions - such as under estimated living expenses or unrealistic future spending patterns.
Users can find themselves trapped in a loan which is too sophisticated for their needs and can be a financial pitfall. The same benefits which are possible from these schemes can be gained from a standard loan with facilities for salary crediting and redraw.
Chris Suffern is the expert behind Refinancing Right, a must read resource for anyone thinking about refinancing their home loan. Don’t get ripped off by the mortgage brokers. Be aware of the dangers, learn the traps and refinance your home loan right. Get this essential mortgage refinance information at: www.refinancingright.com/ |
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