If you are dealing with a mortgage broker, you need to be aware that they might not be free to select from all possible lenders. Instead, brokers have established relationships with a select panel of lenders. The mortgage broker will undertake the process of selecting the best lender, be it a bank or credit union or other non bank lender, with their client, from the panel of lenders it has a relationship with.
In the case of a customer looking at the possibility of switching their existing loan to a new lender the borrower and mortgage broker can go through a relatively simple exercise which involves drawing up a table listing the interest rates, fees and features of the current loan and a few other potential home loans.
Sometimes the best outcome can be achieved by making contact with the current lender and asking them to re-assess the terms and conditions applying to the existing loan. A customer would indicate that they are planning to switch to a cheaper loan offered by another lender.
Some lenders will not want you to switch to another lender and will be responsive to the request. In this case the borrower’s existing lender may offer an alternative loan at a cheaper rate or offer to reduce the interest rate on the home loan currently active.
In the case of a borrower looking to lower their monthly repayments and who may have a variable rate loan, the bank may suggest that you fix the interest rate. Not only will this reduce the amount of repayments on a monthly repayment plan but it will also save the costs associated with switching. Fixing an interest rate should only be done if the rate is historically low and there is an expectation that interest rates will rise in the near future.
In the exercise of drawing up a table you would list the new terms that your existing bank would offer. All the information you need to undertake this exercise is available online and can be sourced by searching for key terms on Google.
It is necessary to know that the quoted ‘standard variable rate’ is an indicative rate and will almost always be negotiated whether by the borrower himself or the mortgage broker acting on behalf of a customer. In this regard the mortgage broker may have an amount of ‘pull’ with a bank or other mortgage provider. They will, in all likelihood have done many deals with a particular institution and this may result in their capacity to source genuine discount rates. It does not however preclude you from dealing direct with a bank.
As you look at potential lenders you’ll find they offer a variety of loans, all with different interest rates, fees and charges, and other features.
These criteria would apply whether the loan is grouped under ‘lo doc” loans or ‘full doc’ loans. Here the main distinction relates to the documentation necessary in relation to demonstrating income sources and financial statements. A table setting out all the features under these headings and across a number of lenders will be a potentially money-saving exercise.
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