Since January this year, Australia’s banks have been eager to attract business. Home loan rates have been discounted by 1% or more from the bank’s standard rates (SVR), on a routine basis.
But how do you know you got a good deal? Or the best deal out there?
What about using a comparison site?
You can surf the web, and you will find some good looking rates. You will surely find plenty of comparison sites – ready to redirect you using pay-per-click through to the banks and discount lenders showing the lowest headline rates. When you get there, you’ll take a look around and try to work out the most important things you need to do next, right? Like:
*How can I find out how much this particular (cheap) lender will lend me? Is it easy to discover?
*Does the cheap rate I just clicked on actually apply to the type of home loan that I need, based on my situation and the features I want, or does that cheap rate apply to someone else?
*Will my information be safe if I open up an enquiry form or application form on the site, and start typing in my income and bank account balances, etc?
*How long will they take to get back to me, and can I trust them?
How about going direct to my bank?
You could avoid the comparison sites and decide to checkout your own bank’s website. After all, you’ve been a customer of CBA/Westpac/ANZ/NAB/HSBC/StGeorge for years, so they should welcome you and offer you a great rate, right?
Now, the bank’s site looks pretty slick these days: there’s video, lists of checklists, 5 step processes, renovations help, ask-the-experts, maybe a virtual chat assistant.. a calculator, and How to Apply instructions or a phone number to call. You might baulk at the phone number because you don’t know what is the right question to ask, it might be 10 o’clock at night (or 7 am in Australia) and you also don’t want to sound dumb, so you go for the ‘How Much Can I Borrow? Calculator’ button first.
You input how many applicants and so on, and then your income as requested (geez why does it look so low on the scale here?) and then it asks you for your monthly expenses. How much are my monthly expenses? Well, that’s kind of hard, what stuff should I include? Do I include eating out and fun stuff? But I would give some of that up if I had a mortgage, probably. But what if I can get rental income from the new place to cover repayments!? Then do I need to breakdown all my expenses?
If you feel you have successfully negotiated the calculator, then you might be confident to head for the “get started” button. Oops! Behind that button are some more nice words and a phone number to call. Damn. OK, request a callback. Now when will they get back? And what will they ask me? How do I ask them for the best rate in town? Or if that rate applies that was on the comparison website?
Chances are that at some point the banker will get back to you. They may answer all your questions and even give you some good guidance. There’s unlikely to be a discount just because you have been with them for 20 years, however if you ask nicely, in today’s climate they will probably offer you a further discount off the advertised already discounted rate. So do ask for it!
Now, how do you know if that discounted, discounted rate is discounted enough?
Ok you could surf the web, go to a second bank’s website, and start the process again…
Or you could ring a mate, or Mum and Dad, and ask their advice, or understand what they did and who they used when they last went through the process. Their situation and when they applied will probably be different to yours – and that’s just the problem, since mortgage rates and conditions vary by situation and market timing.
There are 3 fundamental reasons why asking a mortgage broker instead to do the running around and loan negotiating for you, is ultimately the most efficient approach that’s designed to meet your specific needs.
What are they?
1) Brokers receive notice of the best bank offers directly to their inbox! It’s in the bank’s best interests to make sure brokers are informed of their latest deals so they can let potential customers know about them on behalf of the bank! For example right now one major bank is offering $1,000 cash bonus for customers who apply for a new investment property loan, and current home loan interest rate discounts can range between 1% and 1.3% and even more, in certain circumstances.
Some banks even now have an online pricing request method just for brokers – enabling the broker to apply for a special discount on your behalf, whilst the broker knows what the prevailing discounted rates are at the competitor brands!
In addition, most brokers have sophisticated loan product software that enables them to compare the most important features of the majority of bank’s products (not just price) with a few clicks! If you are in the market for a new home loan you simply cannot access this information so efficiently. Brokers can also request a price review for your existing home loan if you have one already.
2) The job isn’t done when the application goes in. After negotiating all the tricky loan application questions, and hoping you didn’t misrepresent yourself or shoot yourself in the foot!, you will then have to wait while the bank orders a valuation on your property, assesses your credit file and makes a call to approve you or not. Hopefully this all happens in time before you sign a contract to buy the property where you have just made an offer and you have it accepted. The bank may come back to you with questions and clarifications, and they may take longer than 2 weeks to complete this part of the process. They may even miss something and decline you when they should not have. It’s happened before. After that, the bank will create a loan contract which is up to you to check before signing, usually contained within a 20-30 pack of documents sent to your house if you are approved.
Using a broker will mean they will deal with the bank’s requests and push your file along at the bank when required, being your interface with the bank and managing the process as best as possible, keeping you informed along the road between property offer and loan settlement, usually one month to six weeks away. This can save enormous amounts of time and stress, especially if you are busy working full-time anyway during that period, or if you are out of the country in a different timezone.
3) Brokers understand the impacts of the information you are about to submit to a bank when you apply, and appreciate the limitations of bank policies.
Every bank has its own lending policy manual and brokers are trained and have access to those policies at all major banks. For example, you may require 80% of the property price to buy your chosen property, but you may not realise that for your chosen property and your employment situation, 3 out of the first 4 banks you approach only allow a 70% loan amount. A good broker knows the bank that should be approached first, saving you time and money – and protecting your credit rating.
What about if you are in a slightly unsure position about your borrowing ability? For example you are in a probation period at work, you are at the end of a contract, or you have been running your own business for a short while; how will you know which lender and rates will apply to you? And can you still negotiate even if you find the lender that will accept you when others won’t? It’s in these situations that brokers really come into their own, knowing where to source your loan and still negotiating a better deal for you, even with challenging lending situations.
For more information, contact your mortgage broker.
Daniel Shillito is a Mortgage Broker, Financial Adviser and specialist in Expat services at Aussie Finance and Property Group. Daniel can be contacted at daniel@aussiefpgroup.com Ph +44 (0)20 3239 0479 or visit www.aussiefpgroup.com
See more Expat Finance with Daniel Shillito, including:
Aussie Mortgage Application Guide
New Australian credit report laws mean lenders know much more about you
Mortgage offset accounts, are they worth it?
Why the RBA cut interest rates and what it means for you
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