As a loyal customer of your credit provider, you’d like to think that you’re on one of the best home loan rates. However, that’s most likely untrue if you’ve been a loyal customer. That means you’re on what’s called the “back book” of the bank’s home loans. As with many companies, banks get complacent and use you for the revenue you bring in. So the question stands, what’s the best way to get a good home loan rate? What do you do if you’re being ripped off?
This article will be handiest for those customers who always pay on time, never overdraw their accounts, are honest and have a high income. The reason that this is important is because your internal credit rating with your bank will be higher. Did you know that overdrawing your account, even by $1, can impact your credit rating? It’s incredibly important to keep on top of these things. Anyway, onto the steps every high-performing customer should take.
- Evaluate your existing lending. There’s no use calling your bank and complaining about rates if you’re comparing apples to oranges. What I mean by that is, you shouldn’t just look at the cheapest loans on the market and compare your loan to that. Figure out what you have. Do you have a line of credit? Do you have a professional package? Do you have a no-frills home loan? Find out which loan you have and see what interest rates that bank is offering on the product that you already have.
Note: If you can’t be bothered doing this, see a mortgage broker and they will help you, often for free.
- Research what kind of rates are out there, based on your needs. If you need the flexibility of a line of credit, don’t expect home loan rates. It costs banks more money to have those funds available for you to draw upon at any time, than it does for you to have a home loan that’s fully drawn. So for that reason, you should again compare apples to apples. If you no longer require that additional flexibility, you can downgrade; but you can often do this within your own bank, without actually refinancing anywhere.
- Speak to your bank. Once you’ve figured out what you actually have and what’s out there in terms of rates and packages, you should call your bank. If you have a specific contact such a relationship manager, they may care slightly more about your dissatisfaction than if you have to call a call centre. Whilst there’s no need to be rude, you should as for a Discharge Authority if you feel like you’re getting nowhere. A Discharge Authority is the form which you’d need to fill in if you were refinancing. Don’t be surprised if the call centre operator is not in a position to help you and try to remember that it’s not their fault that your rate is higher, even though you are an existing customer.
- Speak to a mortgage broker about refinancing. If you’ve still not had your pricing reviewed to your satisfaction, you need to speak to either another bank, or a mortgage broker. Mortgage brokers can help you distinguish what’s actually being sold to you. For example, if someone is trying to refinance you into something with a much lower rate but much higher fees, this is something that a broker should be able to warn you about. Also, don’t be surprised if you move away from the major banks to find that there may not be quite as much payment or technical functionality in smaller banks than large ones; check first. Just make sure you go somewhere that you are comfortable with in terms of fees and technology if you do go somewhere else.
- If you’re right about being ripped off, bite the bullet and leave. Banks, after all, are there to make money. You could have a brilliant relationship with a banker, and that’s fantastic and definitely something to think about. It’s rare to find talented and caring people anywhere, so I wouldn’t leave purely based on rate if I was in that sort of scenario. However, if you find that the bank is trying to save your business based on everything except for price, you should be prepared to bite the bullet and just leave. New customers will almost always get better deals, so you may be better off becoming a new customer at another bank.
So there it is. Obviously this is not applicable in every situation (for example, if you have hard some sort of financial hardship or are unable to keep up with your loan repayments), but it will apply to many people who have been silently paying off their home loans. Home loan interest rates are at such a trough right now that it’d be difficult not to take advantage of them, and so irritating to see everyone else paying 1-2% less than yourself.