How to choose the right lender – inside information from a mortgage broker

Amidst surging interest in property, there are record enquiries for loans.

The Reserve Bank reiterates again that it will not be raising the cash rate until unemployment has a 4.x% on it and inflation has a 2.x% on it. (The Australian Sat 8^th May)

The Government initiative HomeBuilder is an incredible success but is driving up the cost of materials and labour by up to 30%. (The Australian 9^th May)

Demand for existing houses – including in the regions (such as the Gold Coast) is pushing up house price by similar amounts. (The Australian 9^th May)

How do you choose the right lender and not make an expensive mistake?

A cheap rate is important at the start. What you really want though is the cheapest rate over time.

Some obvious traps to avoid – lenders fall into three categories.

Category 1 – what I call “no-name” lenders. Lenders you have never heard of and did not even exist a year or so ago. They offer rates that are too good to be true… and they are. These lenders sell off your loan as soon as it is settled – to someone else. (The Australian 9^th May) The loan you had with a lender you’ve never heard of is now with someone whose name is completely hidden. Do not go there! I will never recommend these lenders. History is filled with consumer disasters here and history usually repeats.

Category 2 – the 4 major banks. All of them were found guilty of appalling breaches of consumer trust by the Royal Commission. All have had to pay large fines, and all are now reporting large profits again, by overcharging their own customers. Yes, a profitable banking system is important, but do you individually really feel the need to ‘take one for Team Australia’ by paying more than you have to? Own their shares by all means, but don’t borrow from them, until their behavior changes.

Category 3 – I call these the middle tier. Banks outside of the major 4, from 5 – 8. Their starting prices are cheaper than the major 4. They will actually initiate competition for your business.

Above all my advice is to choose a lender who readily agrees to reprice your loan (as time goes by) back to their next ‘new to bank offer’.

When I ask every client of mine “would you like a lender who agrees to reprice your loan back to their new to bank offer” 100% of my clients answer “yes”.

How could anyone answer “no” to that.

Any bank could agree to this, and I have approached all of them.  But at the moment, only some lenders inside Category 3 have reached this agreement with me.

You deserve the cheapest loan over time and one way to get that is to use my experience to only choose lenders who agree with this fundamental principle of fairness.

Now how to find the best house? … well, that’s another question altogether.  My job is to find you the best loan (for your needs).

Do not miss this property boom – waiting will only cause regret.  

As always if you would like advice specific to your own personal circumstances, please call or email anytime, it’s what I’m here for.

Ask Alan – Alan Heath, Australia’s Trusted Mortgage Broker