How a Time Poor Family Saved $200,000 and 3 Years of Mortgage Repayments

Cuts, chops and changes – is your mortgage performing at it’s best?

CASE STUDY:

Let me pose a scenario to you: The Reserve bank of Australia passes on a rate cut of 0.25%

*Does your bank:

A: Pass on the full rate cut of 0.25%
B: Pass on a partial cut of say 0.1%
C: Not pass on any cut at all?

On an average loan size of $550,000 (25 year loan term) at an interest rate of 4.5% the respective loan term savings for a mortgage holder are:

A: $34,375 over a 25 year term
B: $13,750 over a 25 year term
C: Doughnut…..

Back in early 2015 I met a gentleman, married, two beautiful kids and one almighty loan on his own property that had not been reviewed in more than two years.

Below is a real life scenario of how I saved this time poor family more than $200,000 in interest over the life of the loan, which is the equivalent of 36 monthly mortgage repayments!

The packaged arrangement he had with his bank charged him almost $400 per annum to run his loan, i.e. accounts, credit cards etc. and was meant to be the very best arrangement for his situation – “ The best way to manage his mortgage.”

After a consultation with me, reviewing his personal particulars again like income, current debt and most importantly his aspirational goals it was clear that his banking had been left unattended shortly following the settlement of his property. He mentioned to me he didn’t know who was looking after him at the bank and he didn’t have a clue about his entitlements?

The scenario was as follows: $1,250,000 loan size at 4.55% – a packaged discount of 0.7% based on his lending amount. To add to this was an annual fee of $400.

After a thorough mortgage review a refinance to a new bank took place where my client received:

– A refinance rebate from the selected bank of $1500 to cover out of pocket expense of no more than $550 i.e. government registration charges and a discharge of mortgage from his current bank.

– No package fee – saving $400 per annum or $10,000 over 25 years.

– A standard variable discount of -1.45% from a base rate of the time 5.25%, reducing his total standard variable rate to 3.8%.

Naturally the reaction I received from my new client (advocate for life) and his family was one of great thanks! My clients were self confessed workaholics, time poor, managing work, kids and just life in general. They had no time to manage their banking and also explained that they never really understood their loan, interest rates or just what they could be entitled to?

A common practice with mortgage lending in retail banks is the banker giving each client seeking a home loan the “one shoe fits all” approach, like a packaged home loan. The problem with this approach is that it doesn’t get to the root of what the client really needs and what would be a better more tailored solution? Usually the difference between what will fit or best suit a client is determined by a bankers experience and communication skills. Without these major attributes people leave with mortgages they’re paying too much for.

My service promise is to provide my clients looking to borrow for a new home, investment property or to refinance, personalised solutions. Solutions that will be clear and transparent, best suiting the needs and wants of my client without needless expense or confusion. Solutions that ensure over time their mortgage is still performing at it’s best.

I’m a very firm believer that at the core of a service business you have to have your clients best interests at heart. If you can do this successfully you will have enduring relationships and really be able to make a difference in peoples lives – “Being able to make a difference in people’s lives is why I enjoy my work.”