This a case study for you on a recent home loan health check we did with some ideas on what you can do for yourself.
Seeing the last three interest rates hikes totalling 1.25% I have started reaching out to clients with ‘older’ home loans. More specifically, to anybody over three years old knowing the discounts I was getting then, are not as good as now. So one of these clients, let’s call him ‘Dave’ (not his real name) had a four year old home loan and a four year old investment loan.
So firstly, the easiest and least impactful thing we can do for Dave, is negotiate with his current lender to reduce his rates. If better rates are out there, we can access broker pricing tools to submit a request to revisit Dave’s rate discount. We are doing this every day for our clients anyway, but if you’re not a client of ours, know you can go direct and ask, or get your broker to do this. This is the ‘least effort, least reward’ option, and it’s an absolute minimum if you ask me, because if your loan is over two years old and variable, you’ve got a good chance of lowering your interest rate (by increasing your discount), just by calling. So Dave could do this himself, or ask us to do it for him, either way, its worth the call to your broker or bank! In Dave’s case, due to the age of the loan, this simple renegotiation saved him a staggering $7,299 in forward interest based on the loan balances at the time.
What’s the next option? Go shopping! We love shopping here, it’s a part of our job description to ‘broker’ or shop for clients just like Dave. We shop around with the view to saving even more then option 1 above. Of course, we shopped around for Dave at his request, and found that we can save a further $5,027.77 in interest if he wanted to switch lenders. Considering we don’t charge fees for broking your refinance, why wouldn’t you do this. At this point, the savings on interest are $12,326 for Dave.
Now here is the real wild card and my favourite bit… and explains why I’m losing my voice on calls over these savings with clients. We have so many lenders offering what is called “refinance cashbacks” with between $2,000 and $5,000 on offer simply to switch banks to them. There are some basic fine print such as loan size, submit by dates, settle by dates, but aside from that, its fairly easy to qualify for one of these, particularly if your loan is over the magic $250,000 size. Banks are just at war with one another over client acquisition and market growth. Now is definitely is the time to take advantage of these offers if you want to stick some cash in your redraw or have something.
So Dave has done nothing to save $7299, but if he wants to refinance, we can save him a further $5,027.77 per annum, and obtain a $4,000 cashback offer. The total savings are now at $12,326 with a $4,000 switch means savings and cashback combined are $16,326.
If you think this is too good to believe, all I would say is try it yourself!