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?
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.
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
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.
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,
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
5. Can you negotiate a further discount for me with this lender?
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
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
interest-only loans they were offering to customers, so many increased the rates for these loans quickly and significantly to discourage takeup.
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
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.
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.