The pitfalls of chasing a cheaper rate
“Why the hell didn’t you call me?” So I wanted to say to a long-term client who had just done the unthinkable: refinancing without my knowledge, which in turn set him back a couple of years – at a cost of around $8-9000. Ouch.
It might not seem like much at the moment but as I later said, in years to come it’s likely to put some restrictions on him and his growing family due to a lack of equity. All because he refinanced purely based on a seductive rate.
While it’s not an uncommon story, it could have been avoided if they had given me a call.
Jumping ship can be enticing when you are chasing a cheaper rate. However, when you don’t have a broker to walk you through all of the fees and charges that come with a particular lender’s product, or paint a realistic picture of what the consequences might look like, what initially sounded like a great deal can end up looking like your last nightmare. Except you don’t wake up from this one. Not the next day, anyway.
Even those who use brokers often forget what we do, so here are six reasons to remind you:
- We look at the whole picture, not just the stats. Brokers understand how enticing a cheaper interest rate can be, but failing to look at all your options – and trust me, there are hundreds – can lead to a serious case of regret. There’s a pretty big difference between making an impulse purchase like a new pair of shoes that you bemoan the next morning and making a major decision about refinancing that could haunt you for a lifetime – or at least the next couple of years like my clients now face.
- We have direct access to great financial deals. The mortgage and finance markets are dynamic ones, and it’s a fulltime job just keeping up with the nuances of their new products and packages. Mortgage brokers help you cut through the chaos to help you find opportunities you wouldn’t be aware of otherwise. This not only simplifies what can be an incredibly daunting and overwhelming process but also leads to considerable savings over the lifespan of your loan.
- We’re not beholden to any one lender or credit provider. Unlike a salaried bank employee, we don’t push a particular product to meet a quota, get a bonus, or clock off at five p.m. To be brutally honest, they’re rewarded for selling you their lender’s product, not getting you the right deal.
Brokers, on the other hand, are all about finding you a deal to perfectly suit your situation, so you can get to where you want to be – sooner, rather than later.
- We’re in it for the long haul. Having once worked for a large bank, I know just how much of a quick turnover of staff they have. How can you develop a relationship with a branch or mobile lender when it’s likely they would have moved on to greener pastures over the duration of your loan. Brokers, like me, are in the business for the long haul.
- We believe patience is a virtue. “The early bird gets the worm, but the second mouse gets the cheese.” Being first in line is great if you’re talking about Boxing Day sales but when it comes to refinancing your home loan, it’s best not to rush foolishly into signing on the dotted line without evaluating all of your options. And as I explained earlier, your broker is well informed and can assist you in making the right choice.
- Brokers really do have your best interests at heart. I get a lot of satisfaction from finding the right loan that complements not only a client’s financial situation but also one that supports their personal dreams, be it starting a family or going on their dream overseas holiday. Refinancing can be a stressful and confusing time but when you have a broker on your side, you’ll walk away feeling informed, confident and reassured that you made the best decision.
We can all use a little help from time to time, especially when it comes to complicated matters like finance. The right mortgage broker will not only help you pay off your mortgage sooner but introduce you to opportunities you might have otherwise overlooked, or never have known.