Mortgages

Choosing the right bank

Couple hold a house key in front of a house Interest rates are important but I would point out that this is one of the areas where banks differ very little, especially after a bit of negotiating. A lot of differences are usually hidden in the interaction after you have taken the loan. This is when things can really start to cost more in terms of time as well as fees.

The following are some key areas in which banks appear to act differently:

Fees - Break fees, Accounts fees
Customer Service
Internet Banking
Ability to hold rates

Break fees during a fixed term

If you have fixed your home loan and you need to break out of the fixed term there could be a break fee. Reasons for breaking can include selling your house and wanting to take advantage of a lower rate. The calculation of this break fee can be a lot cheaper at certain banks because of how the banks calculate this fee, some use a retail rate and most use a wholesale rate when working out the cost of you not paying that interest anymore.

Fees

Most banks will offer a free cheque account, some try to charge a flat monthly fee. If you decide to take advantage of the flexibility on a redraw facility there can be a fixed cost also. A lot of people use this as their cheque account to lower the overall interest cost so these are very popular. Banks can charge up to $12.50 per month for this type of account, but this does include all the transactions. A lenders mortgage fee only applies with a deposit less than twenty percent. Currently there is a big variance between lenders on this cost, traditionally this was a one-off fee added to your loan amount. But some lenders now charge a margin on the interest rate instead. The difference between lenders on this fee can be in the thousands so it pays to check with a good mortgage broker before deciding on the lender.

Customer Service

There is a good reason why certain lenders keep winning awards based on client surveys, I believe this has a lot to do with the culture and technology of a lender. Having good customer service can mean different things to different people but I think the common theme is trust. Being able to trust that you are in good hands can save a lot of stress.

Internet Banking

Being able to look back more than six months on your transactions can be very useful but surprisingly not every bank offers this service. Some restrict this to only ninety days. What about having to carry around a table or a coding tool so you can work out your password for the sake of security, sound annoying? Is it really needed? No, not with all banks. Some provide a guarantee for any fraudulent activity and let you choose a static password.

Ability to hold rates

Banks vary quite a bit with this and specialist advice from a broker in this area can be very useful. Some banks will enable you to lock in a rate and take a different rate on the day of settlement if it is lower. Many don't have this ability. Some lenders now let you lock in a rate for sixty days when refixing a home loan but other banks will not.