Getting the Best Mortgage Deal - Part I The Research
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