Rate: the be-all and end-all of your loan decision?

Browsing my smart phone this morning, I was amazed to see that you can get a home loan with an interest rate of 1.99%. As a baby boomer, I distinctly remember housing rates of 18% during ‘the recession we had to have’.

We’d like to strongly reiterate an important point we’ve made before: if you haven’t reviewed your housing loan for a few years, now is the time to do so. Call us – we know we can help you save.

At Collins Mann, we work with experienced and trusted loan brokers who have access to well over 30 financial institutions and they’re all clamouring for your business. We’ve seen the pitfalls of chasing the lowest rate.

So, is rate really the be-all and end-all when you’re looking for a financier? In many ways, loan products are similar to airfares. Some airlines advertise very low fares. So far so good but when you add taxes, baggage allowances and in-flight food, the fare doesn’t look quite as attractive, does it? And so it is with housing loans.

Don’t get me wrong, rate is vitally important and whomever you choose needs to be competitive otherwise you are just wasting money, particularly if the debt is against your home, which is a non-tax effective investment.

So what else is there to look out for?

  • What’s in the fine print? Some cheap rates come with a raft of other charges which can include the financier’s solicitor’s fees and charges, settlement fees and so on. You need to compare apples with apples. The comparative rate that financiers are obliged by law to provide is a great starting point as it includes all charges.
  • A low rate generally means that a financier is trying to ‘buy business’. Often they are a small player who can only differentiate their products on price. Our experience is that the after-sales service of many smaller players is below acceptable standards, probably due to low staff numbers in their service departments. By the way, anecdotal evidence about the financier pitching its rates at 1.99% was that business volumes grew to such an extent that they could not meet approval, finance and settlement time frames.
  • Loans with the lowest rates, even from the majors, often have limited features. We’ve recently seen an example from one of the majors where the rate didn’t allow an interest offset account. For our client (an investor), that was a deal-killer.
  • The major banks have the biggest IT budgets and as a result, their internet banking platforms are superior. If internet access is important to you, this is another factor that needs to be considered.

Your broker has all the experience to help you choose wisely and they’re required to advise on why a particular financier was chosen. To do this they need to know and understand your unique requirements. They’re paid by the banks, so in the end you’re buying your broker’s years of market experience for the same cost as if you were doing the research yourself.

For a timely review of your home loan options, please contact Collins Mann on 07 3251 3200.

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