How do you get the best rates not on offer, in the Australian mortgage market today?
Since January this year Australia’s banks have been eager to attract business. Home loan rates are being discounted by 1% from the bank’s standard rates (SVR), and even more, on a routine basis.
These rates are not published usually. They happen, on request.
But how do you go about it and how do you know you got a great deal?
You can surf the web, and surely you will find some good looking rates, and plenty of comparison sites, ready to redirect you to the banks and discount lenders showing the lowest headline rates. When you get there, you’ll probably take a look around and try to work out the most important things you need to do next, like for instance:
- How can I find out how much this particular (cheap) lender will lend to me? Is this easy to discover?
- Does the cheap rate I just clicked on actually apply to me, 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 start typing in my income and bank account balances in their enquiry form?
- How long will they take to get back to me, and can I trust them?
You could avoid the comparison sites and decide to go straight to a bank website. Perhaps you have been referred by a friend to Commonwealth Bank, Westpac, ANZ, NAB or HSBC for instance.
If you are a new migrant to Australia or investing from another country, the chances are that the information on a bank website will not be clear enough, or easily applied to your situation.
Likewise if you are in an uncertain position and unsure how it affects your borrowing ability, for example you are in a probation period at work, you might be towards the the end of a work contract or you have been running your own business for less than 2 years; how will you know which lender and rates can actually apply to you?
And can you still negotiate even if you find the lender that will accept you when others won’t?
You can enter your details in the bank’s mortgage calculator to see perhaps what they might lend you, but this will not determine if the bank will lend to you at all. Of much more importance is: Will this lender appreciate my circumstances and have the policies or flexibility to accept and approve my application?
Every bank has its own unique lending policy. A mortgage broker understands those policies and their limitations, and the impact of the information you are about to submit. 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.
Most bank websites provide a phone number to call to begin your mortgage process. When you reach someone to discuss your case they may answer all your questions and even give you some good guidance. It’s worth remembering they are not the person who will assess your loan application when it goes in.
In today’s climate if you ask the bank they will probably offer you a further discount off the advertised discounted rate. So do ask for it!
Now, how do you know if that discounted rate is discounted enough?!
You could go to a second bank’s website, and a third, 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 the broker 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 6 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.
As described brokers are trained in the various banks’ policies and can much more quickly sum-up your likely acceptance to certain lenders and your pricing options.
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.
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 or call
London +44 (0)20 3239 0479
Sydney +61 2 8003 3472