Conceptual Clarity

So now I was prepared for the debt, it was time to go out and get me some debt

Deal Directly with the Banks

Sorry to all the mortgage brokers out there but I found it much better to deal directly with the banks.  The impression that I got was that the brokers couldn’t offer me anything better than what the banks gave them to offer.  Unfortunately, the ones I spoke to, did not seem to be able to wheel and deal with the banks on my behalf.  So I took a few recommendations from the brokers, a few of my own and I went shopping.

Get the TOTAL Monthly Repayment (INCLUDING fees)

Now’s the time to check your research.  Note that some banks “avoid” publishing some comparison rates by using “extras” packages.  These can escape the comparison rates rules because they aren’t fees - they’re “extras”.  That doesn’t mean that they are bad loans, I have an extras package on my loan and it still worked out cheaper (as I wanted the features).  What you need to do is ask for the comparison rate that includes the extras package.  I found that not all banks have this instantly accessible…but they do have it if you ask for it. 

You should also be able to get a monthly repayments figure off the bank at this stage.  This will tell you exactly where you’re at and is the key to comparing the loans for you.  It will take into account your deposit, the value of the house, the mortgage insurance, the fees etc and wrap it up into the single number that’ll tell you if you can afford things or not!

Make Them Work for Your Business

So after doing all the other things here’s the bit where I got the best deal.  I made the banks work for my business.  While it might seem like they’re doing you a favour by lending you all that cash, I found that it was a very competitive market out there.  The banks are very eager to get your business.  I found that each lender had a loans officer and they were exceptionally helpful.  While this might seem counter intuitive, I received the best customer service experience by far with the major banks.  In the end it came down to two banks for us - the Commonwealth Bank and Westpac.

So what I did was play these final two banks against each other…remember, they WANT your business.  Each time I got an offer from one, I went back to the other with the offer and asked them to beat it.  I went through this a few times until finally, I had the best offer.  In fact, the offer was good enough that the competing bank advised me to go with it because they simply couldn’t do better (I love a bit of honesty in sales!).

The End

So you might notice I’ve not mentioned who our loan is with.  That’s intentional as the service I received from both of those final two lenders was outstanding and in the end, the difference for us was around $25/month.  Yes, one offer was better than the other, but it’s close enough that anyone reading this and employing the same techniques may get a different result…and who am I to stand in the way of competition.

Either way, I did manage to save over $100/month from the advertised rate.  It might not sound like much, but over 30 years that’s a lot of cash.

I hope the advice has been helpful to you, and good luck getting the best deal on your loan.

Since I’ve been through the wonderful experience related to getting a home loan in Australia a few people have asked me about how I shopped around for the best deal on our mortgage.  For those who haven’t heard as yet, I managed to get almost 0.2% off the lowest advertised fixed rate I could find and a 0.8% discount on the lowest advertised variable rate I could find.  To put these savings in terms of “real” dollars that amounts to savings of around $100 per week on the lowest advertised rates.

So here’s how I did it - note that these are just my experiences, it’s a wide and varied market out there so you may be able to do better than me…

Be a Knowledgable Consumer

The most important thing to remember is that while a mortgage does involve a lot of money, you have to approach it as you would any other big purchase.  Survey the market, work out what features you want in a home loan and go into the process with your eyes open.  When you’re doing this there are a few options to keep in mind:

• Decide on variable vs fixed vs split loans (I obviously went with the split because I like having a bet each way)
• Think about features like offset accounts, credit cards, redraw and accessibility to ATMs and branches.  Usually these cost extra but they might be worth it for you
• Be careful about honeymoon rates - look at what the rate returns to after the honey moon is over

As a consumer the most important thing you can be armed with is knowledge.  I found the Infochoice web site to be very useful here.

Look at Comparison Rates and Fees

You need to be able to compare apples with apples and that’s what comparison rates give you.  In Australia, by law, all the lenders have to publish comparison rates.  These rates wrap up all their fees, charges and costs into a single rate.  Comparison rates give you exactly that - the basis for which to compare one loan with another.

Talk to Multiple Lenders

It’s important that you talk to more than just a single broker or bank to get the best deal.  I talked to 4 brokers and a few banks during the time we were looking for a mortgage.  While most brokers were great, one was particularly pushy about getting our business and tried persuading us not to talk to anyone else through various selling approaches.  A few things that I found helped when talking to different lenders:

• Tell them that they are in a competitive situation - if they get stand-offish or try to tell you not to talk to anyone else then I would advise you talk to someone else
• Ask them directly for their best deal keeping in mind all the features you’ve decided on
• In the case of brokers make yourself aware of the commissions that they get for various loans.  While they always have to disclose commissions on the product you decide to go for (if you go with them) make sure you are aware of whether they get flat commissions independant of the loan you decide on - Mortgage Choice has this kind of policy 

By the time I had done all of the above I felt well and truly prepared for all the debt I was about to get into.  Stay tuned for Part II - The Loan

A couple of weeks ago I had to lay a floating wooden floor at our new house.  This put me in a bit of a difficult situation as I am not exactly what you’d call “handy” with anything other than a computer.  So I turned to someone who I knew I could rely on to help me whatever situation I found myself in - my dad.  While Dad (Paul to the rest of the world) knew nothing about laying floating wooden floors, he was still a great foreman and I really appreciated his help, I couldn’t have done it without him.   However, I found it difficult to really convey to Dad how much I appreciated his help.

This caused me to think about all those other people that I rely on both in professional and personal capacities.  I couldn’t get through an average day without having to work with people and indeed rely on many of them.  As a knowledge worker it’s really people that enable me to achieve what I have to at work.  Despite this, sometimes I find it’s easy to forget those who enable me to do my job.

As I reflected on this I realized how much my success and even the success of Ephox depends on the relationships we have built over time.  There are people who I know I can call and indeed rely on to get something done, get it done to the best of their ability and get it done well.  After looking back on my experiences in laying the floor though, I began to wonder if we really recognize the importance of those every day relationships.   So a big thank you to all of you, whether you’re in the Ephox engineering team, a partner organization or even my father, I appreciate the help, and don’t let me forget how much you’ve helped me out.