Why it’s time to talk tough with your bank
HOME loan customers need to talk tough with their banks right now.
Financial institutions are knee-deep in poo at the moment and you need to pounce on this.
They've been making the headlines for all the wrong reasons - the financial services Royal Commission has exposed them ripping off innocent, hardworking customers just like you.
Mortgage rates are also starting to climb - many lenders including AMP, ING, Macquarie, Bank of Queensland and Suncorp have all recently moved rates.
This means more money in their big, fat pockets and less in yours.
I've scored myself that many rate cuts over the past couple of years by being demanding and pushy with my bank, so you should try it too.
Here's how to do it.
1. BE PUSHY
There's no point beating around the bush here.
If you don't know or regularly check your variable rate then you are costing yourself cash.
Banks reserve their best deals for those who are demanding and they rely on lazy customers not phoning them up.
So it's time to lift your game, give yourself a pep talk and don't be afraid to ask for a discount.
In this world if you don't ask, you don't get.
2. KNOW YOUR STUFF
If you're time poor and can't be bothered crunching some numbers I'll do it for you.
If you have a loan-to-value (LVR) ratio less than 80 per cent - say your home is worth $500,000 and your loan is less than $400,000 - you are in the driver's seat.
This means you can switch lenders and won't be hit by excess lender's mortgage insurance, a high charge for those with an (LVR) higher than 80 per cent.
Red-hot owner occupier deals are as low as 3.44 per cent right now so if you're not paying a rate with a "3" in front you need to get off your backside.
On a $400,000 30-year loan a customer paying a rate of 4.5 per cent who switches to a rate of 3.7 per cent would save a whopping $67,000 over the life of the loan.
3. FIND A CHEAPER DEAL
Once you know your interest rate hunt on comparison sites such as RateCity, Canstar, Mozo, iSelect or Finder and see what else is out there.
Chances are the grass is greener.
Punch in your numbers and see what better offers are available.
Online lender UBank - a subsidiary of NAB - has some good deals with rates at 3.69 per cent so phone them up and ask what they can do for you.
Arm yourself with this information because it's bait to get your own lender to come to the party.
4. RING YOUR BANK
Do a few warm-up exercises first if you need, practice a conversation in front of the bathroom mirror and be prepared to put the heat on your lender.
Phone them up and ask to be put through to the home loan retention team.
If they ask why explain you want to close down your home loan account and get a better deal elsewhere.
This will make them shake in their boots.
Once you get through to the retention team - sometimes you won't always get through straight away - tell them you want a rate drop or you're out of there.
Tell them you've been offered a better deal elsewhere because there's a good chance they won't want to lose you.
See what they can offer you and ask them what savings you can get.
5. THE FINAL DECISION
If your existing bank gives you an instant rate drop on the spot then bingo!
You've killed it, give yourself a high five.
But if they refuse to ask them for a mortgage discharge form - this will often get them to change their tune and you may be lucky enough to get a drop at this point.
But if they still won't budge this is when you need to take action and switch.
Don't be afraid to jump banks, it's not as scary as everyone thinks.
And if it saves you tens of thousands of dollars in cash you'll be thanking me later.