Till now, most people haven’t had to worry about paying off their homes – the breathtaking growth in property has done all the heavy lifting for us. But those days are long gone.
Anyone buying a home today is taking on a bloody big commitment – and therefore every little bit you can save helps. So, here’s a way to save yourself a lot of money – and a lot of time.
First, go to the fridge, get a beer, and relax – this is going to be easier than you think. If you’re like most homebuyers by now you’ve spent more than your fair share of time talking to real estate agents. The last thing you want to do is start talking to bank managers. So …
Second, find a good mortgage broker to do most of the legwork in finding the best deal for you – which will be dependent on your financial position, and the place you’re buying.
Just like when you’re talking to your husband, it pays to be crystal clear when talking to your broker: tell them you don’t care about all the bells and whistles the banks offer (honeymoon rates, repayment holidays, fixing part of your loan, having a redraw facility – this is where they hide the fat). All you want is the cheapest loan (after taken into account exit fees).
One way to do this is to ask for a ‘professional package’, which most banks offer. This will give you a discount on your interest rate, lower fees, a fee-free credit card (which you should cut up), and preferably an offset account.
Third, remember that, for all the bankers’ bluster, everything’s up for negotiation – exit fees, entry fees, interest rates, and how you pay your broker – everything.
Most mortgage brokers get paid for their work by the lender you end up going with. They get paid when you sign up for the loan, and then every month you stay with the loan.
This tosses up two challenges:
(1) Most mortgage brokers will only work with banks that pay them kickbacks, and tend to exclude smaller lenders who don’t pay them this way but may be cheaper for you, and
(2) These payments end up costing you a fortune over the life of your loan.
So let your broker know that you’re happy to pay a fee for their service – perhaps three or four thousand dollars – but they are to rebate all upfront and monthly kickbacks straight onto your loan.
Along with throwing everything but the kitchen sink at paying the damn thing off as quickly as you can, this strategy will save you tens of thousands of dollars and slash years off the time it takes you to test out whether the grass under your feet really does feel different!
This article was written by Scott Pape, The Barefoot Investor. For more information on Scott please visit: http://www.barefootinvestor.com/