Refinancing myths smashed !!


Here's what I hear on the phone, and how I reply.


Myth 1: It's expensive to change banks ..

Answer 1: The government has abolished virtually all early repayment penalties, mortgage stamp duty, and exit fees - especially on variable loans. Yes if you do want to do a health check, t's important to call your bank to ask "what would it cost me to close my loan today?". I expect their answer to be anything from $200 to $400, and the total costs to do a refinance to be $600-$900. It's worth being sure, but it's not expensive to change banks any more.


Myth 2: It's not worth it .. (or, "I'm very busy") ...
Answer 2: In the past 20 home loan health checks that I've done, there's only 3 that I thought the rate was "good or quite good (about 4% to 4.3%)". In the rest, the client has a home loan rate of between 4.6% and 5.2%. With changes in RBA rates and banks discounts in the past few years, any variable loan more than 3 years old will almost certainly be between 4.6 - 5.2%. .... The rough math is for a $500,000 loan that is 0.6% too high, it's costing you $3,000 per year by doing nothing..... That's like refusing a $5,000 per year pay rise (because you pay your home loan from net income) .... It's certainly worth taking the time to do a home loan health check - ASK YOURSELF would you like discussing a $5,000 pay rise?. Another Question - what's your home loan interest rate right now? {and did you know that over 75% of people don't know.}


Myth 3: It's such a pain to change banks. .....

Answer 3: Yes, there is a few things to do. But I'd ask you to consider how much work versus how much $$ benefit .... STEPS: Firstly we'd have a chat, probably over the phone. I'd ask you the current loan size, interest rate, and what's great (and not so great) about your current lender. If it's worth action, you'd then need to get a few documents together to meet Martin to look at options. We would then look after it all, and we'd compile and lodge the bank application for you. We would followup up the application for you and check and arrange for you to sign loan documents. We would also co-ordinate with your old bank to do the discharge - you usually don't need to contact your prior bank yourself. {it's a bit like dumping someone, but doing it through a friend}.


Myth 4: I don't know when to do it?

Answer 4: There's a few key times. (1) at least every 3 years (2) if you have a need for new funds to consolidate debt, a holiday, a pool, a car etc (3) you don;t love your current lender any more.


COMMENT: When interviewed, Shane Mott in my office said "a good indication that the home or investment rate is too high is that the customer doesn't know their current interest rate".


office laughs, however this is a serious matter ...