Know Your Home Loan Rates
In a perfect world we could trust our bank to automatically have us on the best interest rates at all times. But of course it doesn't work that way and for good reason too. Everyone has different financial circumstances and so different bank products suit different customers.
But one of the keys to saving money on your home loan, as well as other financial products, is to know your rates. Even better would be to know about some of the features of your loan so you can pay it off faster.
Last week I received a letter from my bank and in big, bold capitals were the words: "A change you'll be happy with". At first glance the letter it appeared to be all good news. It was informed me that I had been on my current home loan for 3 years and they were moving me to a new premium home loan with "an ongoing variable rate that's even better than the one you signed up to."
But the only problem was that the new rate the bank was moving to, wasn't as good as the rate I had been paying!
I had been on a discounted rate for the first 3 years of the home loan and so the new rate was only better compared to the standard variable rate. I called the bank the next day to check all the facts and the new rate was going to be 0.26% p.a higher than what I had been paying!
Technically the bank wasn't lying because the new rate they were proposing was better than the standard variable rate I had signed up to. But in reality the new offer wasn't as good as what I had or what I could negotiate by going onto a different loan.
The other issue was going to be that the new loan didn't come with an offset account, which is a feature that I use and that saves me money. I discussed my options with the bank and we found a loan that would be a similar interest rate to the one that I had been paying and had a 100% offset facility.
If I hadn't been aware of what my current loan rates and features were I would have likely trusted the bank's letter and moved to the home loan they initially recommended. It would have cost me about one thousand dollars per year and added time to paying off the loan.
Be smart and know your rates. Don't trust your bank or financial institution to automatically provide you with the best rates. This doesn't just apply for home loans, but for the full range of interest bearing financial products like credit cards, personal loans and car loans.
If you don't feel comfortable with financial products or know what your current rates and features are, then ask some questions of your mortgage broker, lending manager or bank staff.