How to get a discount on your home loan
How to get a discount on your home loan
It‘s a question all borrowers ask themselves: How can I get the best
possible deal on my home loan? With thousands of loan
configurations available every day from mortgage lenders in Australia,
it can be difficult to know exactly which is the best one for you.
Many claim to have the best rates or the most award-winning deals,
but which offers the most value for each specific customer?
Then there’s the stress of the unknown – is
it time to fully or partially fix a loan by
locking in the interest rate paid for a set
period? And should that be for one, two,
three or five years?
The truth is that home loan offers change
constantly. When it comes to deals, today’s
caviar can quickly becomes tomorrow’s fish
paste. But there are some fundamental
rules that borrowers need to follow to put
themselves in the best position to take
advantage of meaningful discounts.
Technology plays a major role these days –
home loan hunters have access to
information that was once tightly held by
banks, accountants, mortgage brokers and
financial advisors. These established players
have refused to pass on this knowledge to their
customers and have become rich through buyer
ignorance.
We established uno Home Loans in 2016 to
make transparent the information that kept
buyers in the dark for decades. We’re
passionate about offering advice and assistance
to help find the best possible deal for you.
unohomeloans.com.au offers a range of owner-
occupier and investor loans from major and
specialist lenders, allowing you to compare rates
and features. Our staff, who are paid by salary
not commission, work on your behalf to find the
ideal mortgage package every time.
To find out more, contact uno Home Loans at unohomeloans.com.au or 133 866. 01
Jason Azzopardi
uno’s Chief Financial
Officer and Head of
Home Loans
Jason Azzopardi has more than 20
years’ experience working in private
practice and the big banks. In this
ebook, he offers inside tricks and tips
to help those wanting to find the best
possible refinance or new home loan
for their situation.
How the system worksNot all home loans are created equal. Financial institutions look at a number of
factors to determine what kind of deals they will offer individual customers.
The first variable is the loan amount, which
is divided in segments – usually “up to
$500,000”, “$500,000 to $750,000” and
“$750,000 plus”. The larger the loan size,
the more bargaining power you have.
The next part of the equation is your loan-
to-value ratio (LVR). You’re in a good
bargaining position if the amount you’re
borrowing is less than 80 per cent of the
value of the property you are looking to buy
or refinance. So if you have an LVR of less
than 80 and you’re looking to borrow more
than $750,000, you should be in a prime
position to negotiate the best possible deal.
Another factor is how you plan to make
your repayments – either principal and
interest or interest only. Loans that are
interest only, where borrowers are not
required to pay anything off the principal for
a predetermined period, sound attractive for
those with short-term cash flow issues or
investors wanting to claim a tax deduction.
But uno has developed a calculator that
shows how principal-and-interest loans with
a lower interest rate can be a much better
option in some circumstances (even for
investors, who benefit from income tax
deductions on the interest component);
paying off the balance of the loan can save
money from year one.
Something else borrowers might not be
aware of are “non-binding requests”. These
are specific pricing requests that all brokers,
including those at uno, might make to a
lender on your behalf. This is
effectively a negotiation based on your
financial strength and the number of
competitive options available to you in the
mortgage market. The lender will agree to a
better deal if they want your business badly
enough. This is something you should
discuss with your uno mortgage adviser.
To find out more, contact uno Home
Loans at unohomeloans.com.au
or 133 866.
If you have a larger home loan or a low
loan-to-value ratio, know that you
might have more bargaining power to
get a highly competitive deal.
Tip:
Turning the screwsBanks don’t enjoy losing customers and their retention tactics can often be quite
aggressive. Those going through the process of refinancing a home loan can expect
a call from someone at their old bank offering a “better” deal than the one that
persuaded them to try to leave in the first place. Lenders know that even matching
the new offer might be enough to persuade some customers to stay because moving
seems to involve a lot of paperwork and hassle. Bank loyalists who are offered a
lower interest-rate might even convince themselves that they’ve had a “win”.
Customers are often their worst enemies
in these situations. They can convince
themselves that, because their transaction
accounts, credit cards or personal loans
are with a particular financial institution, it
would be too complicated or expensive to
move their mortgage to another lender…
even if staying is costing them money
each and every year.
It's a myth that people must shift all of
their accounts if they move their mortgage
elsewhere. In fact, they can usually leave
everything as it is – the direct debit for
that new home loan can come straight out
of their existing transaction account. In
most cases, it’s not difficult or costly to
move home loan accounts (just ask your
uno adviser how to do this).
Banks know those customers they value
the most and will offer them inducements
to stay, which can often result in a better
deal. But customers are much better off
testing the market by logging into the uno
website and comparing what other
lenders are offering in an effort to get their
business.
03
Tip:
Be open to having your
transaction accounts with
a different lender to your
home loan. It could save
you thousands a year.
“It's actually quite
straightforward to
change home loan
providers, and we
will arrange it all for
you.”
– uno’s Jason Azzopardi
Exclusive offersThe relationship between the big four banks, smaller lenders and mortgage
brokers has always been complex and confusing. While banks have their
own direct home loan offers that have traditionally dominated the market,
they provide finance for other lenders who must stay lean to be competitive.
All the while, brokers often sell mortgage packages from their “preferred
suppliers”, rather than canvassing all lenders in the market for the best deal,
to customers who are often unaware that the two organisations have a
financial arrangement.
But it would be wrong to think that banks offer
their mortgages at different rates for different
brokers. This “channel conflict” would create a
massive problem for brokers who couldn’t offer
competitive options to their customers.
There are a few ways to get a deal that is better
than the one advertised by a lending institution:
through a non-binding request or selected,
exclusive offers via brokers. A particular bank
may give uno customers a special home loan
rate that is not advertised on broker rate cards.
Smaller or specialist lenders may also offer deals
that allow them to compete for attention with the
major banks. Often, a broker will agree to the
deal to attract customers, even if it means they
will lose revenue on the arrangement.
It’s always possible for a broker to play one
lender off against another. If uno knows it can
get, say, a five-year fixed rate for 3.99 per cent
from lender A, one of our mortgage advisers
might approach lender B and ask whether they
can beat that deal - say at an interest rate of
3.5 per cent. Lender B might not agree to this
request, but it could come back with a more
competitive offer.
uno regularly offers home loan deals that are
cheaper than those offered by the lenders
themselves, but customers can compare these
alongside the full range of mortgages on the
uno platform. Unlike other brokers, uno gives
its customers full disclosure and transparency
when it comes to its home loan offers.
Tip:
Ask your adviser if there are
any un-advertised offers or
discretionary pricing
available to you.
“We approach different
lenders directly, trying to
get special offers for our
customers”
– uno’s Jason Azzopardi
Concerns about the traditional broker modelMany industry stakeholders and commentators believe that the traditional
mortgage broker model, which sees brokers act as intermediaries between
lenders and customers, has always had a fundamental problem.
1. Are you showing me all of the home
loan options available to me?
2. How do you decide which is the best
option for me?
3. What inducements do you receive to
use a particular lender?
4. What commission will you be paid if
successful?
5. Can you negotiate a further discount
for me with this lender?
Tip:
Understand how commissions might
sway advice, and consider using an
adviser who isn’t personally paid sales
commissions (like uno’s advisers).
traditional brokers almost never get to see the full
range of home loan offers available to them.
They only ever find out about the ones their
broker chooses to show them.
In contrast, uno guarantees a fully transparent
view of the all of the loans available from every
lender we offer, giving our customers the power
to arrive at the best deal for them. As a company,
we receive commissions from lenders for loans
settled; however, the individual advisers who will
be helping you with a home loan do not receive
sales commissions. Instead, they’re remunerated
by salary. This means that the person who’s
assisting you with your home loan has no
immediate financial incentive to sell to you, give
you a larger loan than you need, or put you with a
particular provider.
Almost all brokers in Australia are paid by
commission (in contrast - uno’s advisors receive
a salary) and most lenders pay them about the
same – usually 60 to 65 basis points of the loan
amount. That’s the equivalent of about $6000 on
a $1 million loan, so their margins are tight. And
brokers get none of this unless the loan settles.
They also get a ~15-basis-point “trail” income on
the balance of each loan they sell. This means
that if someone doesn’t pay off the balance of
their mortgage for 30 years, their broker gets a
cut right through until the end of the loan term.
This might be good news for some brokers, but
there are concerns from outsiders that it’s
potentially not in the best interests of consumers.
Prospective borrowers who use
Questions to ask a mortgage broker:
05
Importance of timingOften, the opposite is true. A particular bank may
try to encourage borrowers in a certain segment
to take out a specific type of loan over, say, a
certain period. When interest rates are deemed
to be low and there is little immediate prospect
that they will rise quickly, lenders will offer
attractive fixed-rate deals to get customers
through the door.
For those seeking a better home loan deal, it
pays to know that lenders’ rates and offers
change regularly – often weekly. It’s important to
check uno’s website frequently to compare the
latest deals.
The product and pricing committee of each major
bank in Australia meets weekly. The men and
women on these committees look at the bank’s
margins and product mix and pull certain levers
to suit their commercial purposes at different
times.
It could be that they may need more deposits to
fund their lending book, so they’ll offer a more
attractive interest rate for investors. Or they might
put up interest rates to increase their profit
margins or change the deposit level for a specific
investment loan. Recently, for example,
regulators told banks to slash the number of new
interest-only loans they were offering to
customers, so many increased the rates for these
loans quickly and significantly to discourage take-
up.
Fact
The total value of
outstanding Australian
home loans is $1.664
trillion.
Source: RBA, May
2017
Tip:
Get advice from someone inside the industry. They should know that timing is everything and can use the lender’s current motivations to help you get a better deal.
Fact
Australia’s housing market is worth more than $6.6
trillion, an increase of $1 trillion over just two years.
Source: RBA, June 2017
Lender ‘scorecards’Another lever used by banking product and pricing committees is
what’s called the “scorecard”. This is where a lender takes into
account the financial circumstances of customers to assess their
credit risk, based on a number of factors. It also measures specific
areas of the property market – perhaps based on geography or
dwelling type – and makes it either easier or more difficult for these
customers to borrow money to buy in those segments.
Lenders’ scorecards determine how much
borrowing power a customer has when they
apply for a loan, and they’re often based on the
state of the market. An oversupply of property in
a certain area or an anticipated increase in
vacancy rates may present problems for those
seeking to buy apartments. In these cases,
lenders will make it more difficult for certain
customers to obtain loans for these purposes by,
for instance, raising the deposit level required.
The converse is also true, of course. First-home
buyers might be able to get a better deal if they
have more than 10 per cent deposit, have a
guarantor or are supported by a government
grant. What is “fashionable” for lenders can often
change quickly, and this has a dramatic effect on
a borrower’s bargaining power.
The best way to know what’s happening across
the market – to get the best options at any one
time – is by keeping track of uno’s changing
database of home loan offers on
unohomeloans.com.au and to contact a uno
adviser.
There’s something that those seeking a home loan can do to help them
push hard for a bargain – ensure they have a good credit rating.
If you only have a 5% deposit, this will
need to be “genuine” savings – not
dependent on your brother selling his car
or a loan from a friend. These are the
things that make lenders nervous.
If you’re in good financial health, and you
can prove it, you’ll be in a much stronger
negotiating position.
The key is to pay off credit cards on time and
have no other outstanding financial
commitments that may raise a flag with a
lending institution. You can check your credit
rating for free through companies such as
Veda; you can be sure prospective lenders will
be checking too.
It’s a good idea to review your financial
situation every few months. For those with
existing loans – even a mortgage – it’s easy to
“set and forget” the amount of money flying out
of a bank account every month. Refinancing or
consolidating a debt into a better loan structure
may save you hundreds of dollars a month and
cut years from your repayment schedule.
For those looking for a good deal to get into the
property market, the goal is to be more than
just “approvable”. Having enough savings to
cover a minimum 5 per cent deposit is just the
start – you also need to cover stamp duty and
legal fees that might reach $3000.
Tip:
Check your credit rating
and, if needed, make
changes to improve it
before you go deal-hunting.
A uno adviser can help you.
“When refinancing,
there's the money
you can save as well
as years off your
mortgage.”
– uno’s Jason Azzopardi
Getting your house in order
uno’s Better Deal Challenge*When we learned that more than 1 in 3 homeowners were not confident they
got the best deal on their home loan, we decided that had to change.
We believe customers deserve better from the
biggest financial transaction they’re likely to
make in a lifetime. So, we’re putting our money
where our mouth is: Even if you find a better deal
than the one we do, we’ll negotiate with our
lenders and endeavour to match it.
And, if that happens and you end up getting your
home loan through us, we’ll also pay the
difference between our proposed loan and the
better deal you found for a year. You can read
more about our Better Deal Challenge here, and
you can also speak to a uno adviser.
Tip:
If you’re still unsure whether you’re
getting the best deal, take uno’s Better
Deal Challenge.
09
How uno can helpConsumer-facing technology has changed the home loan landscape
for good… and for the better. It has put the power firmly in the hands
of customers, giving them unprecedented access to what Australia’s
large and specialist lenders are offering at all times.
Loan seekers can choose the features they want,
put their financial details securely into powerful
calculators to see what they might pay and
compare the full range of options to decide which
ones suit their specific needs. They can even
apply and get their loans approved online. And
they can do this whenever they want, using
whichever digital device they choose.
uno has taken this one step further. To take the
hassle out of finding the right home loan, its
mortgage experts are available seven days a
week to offer advice over the phone, via email
or live chat, and negotiate with mortgage
lenders. They are not paid commissions – they
are only motivated to land the best possible
deal for you.
What to do nextTo find out more, visit unohomeloans.com.au, start a live chat with an
adviser, or phone 133 866.
This information is general in nature, and you should always seek professional advice when making financial decisions.
* A Better Deal is a proposed loan with a lower total cost over a selected period. If the customer finds a Better Deal on a
Comparable Product and they go with uno, we’ll pay the difference of the monthly repayment amounts between uno’s proposed
loan and the customer's Better Deal for the first year after settlement. A customer's Better Deal must be evidenced to our
satisfaction within 72 hours of receiving a Credit Proposal. Subject to assessment, eligibility and terms & conditions. Approval not
guaranteed. Valid until 31/12/2017.
Tip:
Use technology to identify the
optimal options available to you.
“Our platform is constantly
updated with the thousands
of product variations flooding
the Australian home loan
market. It’s impossible for a
traditional broker to have
that amount of data in their
head.”
– uno’s Jason Azzopardi
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