Mortgage tips

Bridie Smith | December 4 2002 | The Age (subscribe)

Skip the honeymoon, forget being loyal to your lender and remember that with knowledge comes power.

These are just some of the practical tips you can use to get ahead with their mortgage and save thousands of dollars in the process.

Loan experts advise borrowers to carefully consider the following options:

Sound too good to be true?
Then it probably is. Many people argue that discount rates at the introductory stages of an owner-occupier's mortgage are nothing more than a marketing tool lenders use to get your attention. When the honeymoon period is over, you'll be left with a hangover. Rates will invariably rise to compensate the bargain basement prices and lenders will generally roll your loan over to their standard variable rate. And this is often higher than some of the lower basic loans around.
On top of this, owner-occupiers can face exit penalties for refinancing within two or three years.

Package deals
Knowing what questions to ask your lender when you are negotiating can put you ahead of other borrowers and get you a better financial package. Ask your lender if they can include discounted home insurance, fee-free credit cards and transaction accounts or financial advice at no additional charge. Often it's the case that if you don't ask, the offer won't be made.

Sit on the fence
Splitting your loan is a good way of hedging your bets. A part-fixed, part-variable loan protects borrowers against interest rate rises without much disadvantage. If rates do rise, you can rest with the knowledge that being partially wrong is better than being 100 per cent wrong. If rates don't go up significantly, then you are still benefiting from the flexibility of a variable loan.

Consider refinancing
Review your loan annually and investigate what else the market can offer you.

Don't be lazy
Your mortgage shouldn't be left to simply roll along. Make your repayments on time every time, or even better, if you have discretionary income, plough it into your mortgage. Knowledge is power in the home loan market and, with the life of most home loans spanning decades, be aware that things change. Keep yourself up to date.

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