The most common question I ever receive is – what is the cheapest loan?
The answer, boy I wish it was that simple.
Obviously, interest rate is very very important – do I want to say vital? But what if the lowest rate you’re considering comes with a huge annual fee? If you loan is over $250,000 the fee very often makes up for the discount and we’re happy. But if your loan is much smaller – say $100,000 – then an annual fee of – say $375 – is in fact equivalent to a 0.375% p/a bump on your interest rate. There’s easily enough diversity in loans to make this now a less attractive option.
Take again a cautious saver who carefully puts every spare dollar into their home loan and 8 times a year they redraw some of that spare cash to pay the big expenses; rates, rego’s, school fees, you get the picture. Lets imagine that careful saver has a loan with a $50 fee per redraw, see where I am going with this? This quickly adds up (in this example) to $400 a year in additional fees. Plenty of loans on offer today have free redraw, it’s a very important consideration if you are the cautious saver type (and if you are, three cheers for you, your home loan is my favourite place for these savings, subject to the above!)
Next example, a high income earner with a small loan wanting to repay the loan very quickly takes a fixed rate. Some fixed rates won’t allow you to pay any extra off of the loan at all – nada! Some only $500 a month, some $5,000 a year, others $10,000 a year and the final example $15,000 per fixed rate period ( ie: 1,2,3,4,5 or up to 15 years), and yet there is one fixed rate loan where additional repayments are unlimited! You can see how important this is as a consideration. Want an offset account ? Most fixed rates won’t allow that either, just saying!
So, you’re a plain and simple saver and you just want a plain and simple loan – pick the cheapest rate and no fees and we’re good right? Did you know it’s only
recently that the “cheapest rate loan” on the market didn’t allow an extra dollar in repayments and had a huge exit fee if you left within the first 5 years?
Ok – so it’s too confusing I’m just going to stick with the loan I have – its working fine for me. Sorry again, nothing stays the same and it’s very likely that if you have been in the loan for more than 2 years you’re already paying too much.
But there is a simple solution and That is where I come in! Talk us. As professional mortgage brokers we are trained to listen to your needs: explain the way you live, the way you bank, your saving habits and bill paying habits, let us put options on the table that you didn’t even realise you had & suggest a new loan that will work even better. Most mortgage brokers don’t even charge you a fee for their expert advice, that’s a complete bargain.
What are you waiting for?
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