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Interest rates are currently at a record low, as a result there are so many Banks and non-Banks in the market looking to offer a ‘great interest rate’ for you to refinance your Home or Investment loan over to them. Some lenders are even promoting ‘cash back’ offers to cover any of the additional fees so there is minimal out of pocket expense.
There are a lot of reasons people are less inclined to shop around and the major factor is usually time constraints. There isn’t enough time in the day to get everything we need done so shopping around is usually added to the ‘To Do’ list along with comparing your Insurance policies and fixing that leaky tap. Unfortunately, as a result before you know it a couple years have gone by and all of a sudden your package may no longer be the best option for you.
Mr and Mrs Smith purchased a home 5 years ago and have a standard variable home loan with ABC Lender. They currently owe $450 000.00 and last time they checked the interest rate they were paying is 4.50%pa, they are looking for no application fee and they would like the option of a redraw facility so based on this they can secure an interest rate of 3.74% with XYZ Lender. When you take into account break fees and registration of Mortgage fees Mr and Mrs Smith can save $2784 in the first year and over the remaining 25 years a total of $39,643.
While there is a whole list of reasons why we don’t currently shop around as often as we could there is definitely some optimum times when you should consider shopping around, if for no other reason than for your peace of mind.
These times may include;
• Coming off a Fixed interest rate
• Experienced poor customer service with your current Lender
• Looking to borrow more funds
• Looking to consolidate debit
• Looking for more Flexibility
• Thinking of purchasing an investment property
There are also some instances where shopping around would be best left for a short period, these times include;
• Recent lower in income
• Locked into a Fixed interest rate
• Poor credit history
• Recently applied for multiple loans
• Poor repayment history on current debits
If shopping around is as easy as finding the lowest interest rate and going with that Lender, then more people would be inclined to shop around more often. The reality is there are other factors that needed to be considered and added into the costs to find the real saving and ensure you are in fact saving money. Aside from your personal circumstances and what your plans are for the future there are some generic factors to consider while doing your research;
• Exit and application fees that may be charged
• Repayment options
• Access options
• Monthly fees
• Loan term
How you physically shop around is the easy part, these days you can either do the research yourself using the Internet and going door to door to different lenders to negotiate or you can in list the help of a Mortgage Broker to do the research for you.
At no cost to you a Mortgage Broker can get to know more about your personal circumstances, what you want and then negotiate with other lenders to see if there is a better option for you. This is beneficial for those clients that don’t know where to start and given that most Brokers are mobile and available by appointment it’s a great time saver too.
So whether you’re looking to save money on your home loan, haven’t had it reviewed in years or you want the peace of mind then shopping around is the best option for you. Depending on how you choose to compare it may be as easy as booking an appointment with your Mortgage Broker.