How to get a discount on your home loan - uno Home Loans

How to get a discount on your home loan - uno Home Loans

How to get a discount on your home loan How to get a discount on your home loan Jason Azzopardi uno’s Chief Financial Officer and Head of Home Loan...

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How to get a discount on your home loan

How to get a discount on your home loan

Jason Azzopardi uno’s Chief Financial Officer and Head of Home Loans

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

banks, accountants, mortgage brokers and

it time to fully or partially fix a loan by

financial advisors. These established players

locking in the interest rate paid for a set

have refused to pass on this knowledge to their

period? And should that be for one, two,

customers and have become rich through buyer

three or five years?

ignorance.

The truth is that home loan offers change

We established uno Home Loans in 2016 to

constantly. When it comes to deals, today’s

make transparent the information that kept

caviar can quickly becomes tomorrow’s fish

buyers in the dark for decades. We’re

paste. But there are some fundamental

passionate about offering advice and assistance

rules that borrowers need to follow to put

to help find the best possible deal for you.

themselves in the best position to take

unohomeloans.com.au offers a range of owner-

advantage of meaningful discounts.

occupier and investor loans from major and

Technology plays a major role these days –

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.

specialist lenders, allowing you to compare rates and features. Our staff, who are paid by salary

home loan hunters have access to

not commission, work on your behalf to find the

information that was once tightly held by

ideal mortgage package every time.

To find out more, contact uno Home Loans at unohomeloans.com.au or 133 866.

01

How the system works Not 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

interest only, where borrowers are not

effectively a negotiation based on your

is divided in segments – usually “up to

required to pay anything off the principal for

financial strength and the number of

$500,000”, “$500,000 to $750,000” and

a predetermined period, sound attractive for

competitive options available to you in the

“$750,000 plus”. The larger the loan size,

those with short-term cash flow issues or

mortgage market. The lender will agree to a

the more bargaining power you have.

investors wanting to claim a tax deduction.

better deal if they want your business badly

But uno has developed a calculator that

enough. This is something you should

shows how principal-and-interest loans with

discuss with your uno mortgage adviser.

The next part of the equation is your loanto-value ratio (LVR). You’re in a good bargaining position if the amount you’re

a lower interest rate can be a much better option in some circumstances (even for

To find out more, contact uno Home

borrowing is less than 80 per cent of the

investors, who benefit from income tax

Loans at unohomeloans.com.au

value of the property you are looking to buy

deductions on the interest component);

or 133 866.

or refinance. So if you have an LVR of less

paying off the balance of the loan can save

than 80 and you’re looking to borrow more

money from year one.

than $750,000, you should be in a prime position to negotiate the best possible deal.

Something else borrowers might not be aware of are “non-binding requests”. These

Another factor is how you plan to make your repayments – either principal and interest or interest only. Loans that are

are specific pricing requests that all brokers, including those at uno, might make to a lender on your behalf. This is

Tip: 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.

“It's actually quite straightforward to change home loan providers, and we will arrange it all for you.”

Turning the screws

– uno’s Jason Azzopardi

Customers are often their worst enemies

It's a myth that people must shift all of

in these situations. They can convince

their accounts if they move their mortgage

themselves that, because their transaction

elsewhere. In fact, they can usually leave

accounts, credit cards or personal loans

everything as it is – the direct debit for

are with a particular financial institution, it

that new home loan can come straight out

would be too complicated or expensive to

of their existing transaction account. In

move their mortgage to another lender…

most cases, it’s not difficult or costly to

even if staying is costing them money

move home loan accounts (just ask your

each and every year.

uno adviser how to do this).

Banks 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”.

Banks know those customers they value the most and will offer them inducements to stay, which can often result in a better

Tip:

deal. But customers are much better off testing the market by logging into the uno

Be open to having your transaction accounts with a different lender to your home loan. It could save you thousands a year.

website and comparing what other lenders are offering in an effort to get their business.

03

Exclusive offers

Tip:

The 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,

Ask your adviser if there are any un-advertised offers or discretionary pricing available to you.

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

It’s always possible for a broker to play one

their mortgages at different rates for different

lender off against another. If uno knows it can

brokers. This “channel conflict” would create a

get, say, a five-year fixed rate for 3.99 per cent

massive problem for brokers who couldn’t offer

from lender A, one of our mortgage advisers

competitive options to their customers.

might approach lender B and ask whether they can beat that deal - say at an interest rate of

There are a few ways to get a deal that is better

3.5 per cent. Lender B might not agree to this

than the one advertised by a lending institution:

request, but it could come back with a more

through a non-binding request or selected,

competitive offer.

exclusive offers via brokers. A particular bank may give uno customers a special home loan

uno regularly offers home loan deals that are

rate that is not advertised on broker rate cards.

cheaper than those offered by the lenders

Smaller or specialist lenders may also offer deals

themselves, but customers can compare these

that allow them to compete for attention with the

alongside the full range of mortgages on the

major banks. Often, a broker will agree to the

uno platform. Unlike other brokers, uno gives

deal to attract customers, even if it means they

its customers full disclosure and transparency

will lose revenue on the arrangement.

when it comes to its home loan offers.

“We approach different lenders directly, trying to get special offers for our customers” – uno’s Jason Azzopardi

Concerns about the traditional broker model Many 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.

Tip: Understand how commissions might sway advice, and consider using an adviser who isn’t personally paid sales commissions (like uno’s advisers).

Almost all brokers in Australia are paid by

traditional brokers almost never get to see the full

commission (in contrast - uno’s advisors receive

range of home loan offers available to them.

a salary) and most lenders pay them about the

They only ever find out about the ones their

same – usually 60 to 65 basis points of the loan

broker chooses to show them.

amount. That’s the equivalent of about $6000 on

Questions to ask a mortgage broker: 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?

a $1 million loan, so their margins are tight. And

In contrast, uno guarantees a fully transparent

brokers get none of this unless the loan settles.

view of the all of the loans available from every lender we offer, giving our customers the power

They also get a ~15-basis-point “trail” income on

to arrive at the best deal for them. As a company,

the balance of each loan they sell. This means

we receive commissions from lenders for loans

that if someone doesn’t pay off the balance of

settled; however, the individual advisers who will

their mortgage for 30 years, their broker gets a

be helping you with a home loan do not receive

cut right through until the end of the loan term.

sales commissions. Instead, they’re remunerated by salary. This means that the person who’s

This might be good news for some brokers, but

3. What inducements do you receive to use a particular lender? 4. What commission will you be paid if successful?

there are concerns from outsiders that it’s

assisting you with your home loan has no immediate financial incentive to sell to you, give

potentially not in the best interests of consumers.

you a larger loan than you need, or put you with a

Prospective borrowers who use

particular provider.

5. Can you negotiate a further discount for me with this lender?

05

Importance of timing

Fact The total value of outstanding Australian home loans is $1.664 trillion. Source: RBA, May 2017

The product and pricing committee of each major

Often, the opposite is true. A particular bank may

bank in Australia meets weekly. The men and

try to encourage borrowers in a certain segment

women on these committees look at the bank’s

to take out a specific type of loan over, say, a

margins and product mix and pull certain levers

certain period. When interest rates are deemed

to suit their commercial purposes at different

to be low and there is little immediate prospect

times.

that they will rise quickly, lenders will offer attractive fixed-rate deals to get customers

It could be that they may need more deposits to fund their lending book, so they’ll offer a more

through the door.

attractive interest rate for investors. Or they might

For those seeking a better home loan deal, it

put up interest rates to increase their profit

pays to know that lenders’ rates and offers

margins or change the deposit level for a specific

change regularly – often weekly. It’s important to

investment loan. Recently, for example,

check uno’s website frequently to compare the

regulators told banks to slash the number of new

latest deals.

interest-only loans they were offering to customers, so many increased the rates for these loans quickly and significantly to discourage takeup.

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.

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

The best way to know what’s happening across

borrowing power a customer has when they

the market – to get the best options at any one

apply for a loan, and they’re often based on the

time – is by keeping track of uno’s changing

state of the market. An oversupply of property in

database of home loan offers on

a certain area or an anticipated increase in

unohomeloans.com.au and to contact a uno

vacancy rates may present problems for those

adviser.

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

Fact Australia’s housing market is worth more than $6.6 trillion, an increase of $1 trillion over just two years.

change quickly, and this has a dramatic effect on a borrower’s bargaining power.

Source: RBA, June 2017

Getting your house in order 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. The key is to pay off credit cards on time and

If you only have a 5% deposit, this will

have no other outstanding financial

need to be “genuine” savings – not

commitments that may raise a flag with a

dependent on your brother selling his car

lending institution. You can check your credit

or a loan from a friend. These are the

rating for free through companies such as

things that make lenders nervous.

Veda; you can be sure prospective lenders will be checking too. It’s a good idea to review your financial

If you’re in good financial health, and you can prove it, you’ll be in a much stronger negotiating position.

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

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 help

“Our platform is constantly updated with the thousands of product variations flooding

Consumer-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.

the Australian home loan market. It’s impossible for a traditional broker to have that amount of data in their

Loan seekers can choose the features they want,

uno has taken this one step further. To take the

put their financial details securely into powerful

hassle out of finding the right home loan, its

calculators to see what they might pay and

mortgage experts are available seven days a

compare the full range of options to decide which

week to offer advice over the phone, via email

ones suit their specific needs. They can even

or live chat, and negotiate with mortgage

apply and get their loans approved online. And

lenders. They are not paid commissions – they

they can do this whenever they want, using

are only motivated to land the best possible

whichever digital device they choose.

deal for you.

head.” – uno’s Jason Azzopardi

What to do next To 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.