How getting comfortable in your Home Loan can cost you an overseas holiday each year!
I normally don't like clogging your feed up with boring finance stuff but I just had to share a client experience today which has been on my mind all evening.
Today I met with a young first home owner who, for her age had done exceptionally well in getting her foot in the door with her property several years ago. She had a good income, no credit cards or other loans and was tens of thousands ahead on her home loan. She'd come to me like many others and just wanted to know if her loan could be improved and rates reduced.
After a quick review I had noticed that she'd done everything right except for one thing and that was not getting her loan reviewed in the 7 years shes owned the home. As a result her interest rate was well past it's used by date and almost an entire percentage above current promotional rates. What really shocked me was that she was still hesitant in switching banks because she was so comfortable with having all of her banking with her bank of 20 + years which I can kind of understand. Once I broke down the savings and explained that she could easily take an overseas trip each year with her savings she started to slowly entertain the thought of moving banks....
Throughout the meeting she asked some really simple but brilliant questions that I want to share in case others would be thinking the same
- Do I have to change all of my banking if I change my home loan? Answer. No, this is always optional. I do not advise doing so until you are completely comfortable with the new lender however there may be other benefits if you do
- Can the new bank direct debit from my current bank?
Answer YES they can.
- Does extra repayments and redraw work the same?
Answer. Yes it does, if redrawing to another banks account it may take up to 2 business days to clear
- How much does it cost to switch banks?
Answer. On average approx $500 and savings will need to be demonstrated before applying
- Can you just renegotiate with my current bank?
Answer. Yes, I will always do this in the first instance however they are likely to only discount on new business rather than existing
- Refinancing your loan has never been cheaper and more hassle free. Some banks will even pay you up to $1500 as a one off bonus
- Just about all banks have full internet banking facilities, phone banking apps and all the features you are used to (just with a different logo)
Ask yourself, how has your bank or lender rewarded you recently for your loyalty?
So there you have it, whether it be your health and fitness, relationships or finances. Challenge yourself not to get comfortable!