refixing your mortgage – switching banks might get you the best deal

Wednesday, April 22nd, 2015

Is it time to fix your mortgage? Do you stay with your current bank or is the grass greener elsewhere?

When it’s time to refix their current mortgage clients often ask us if switching banks would get them a better deal. The common theme in all our conversations is that they’d be happy to stay with their current bank if they’re offering the best deal, and they’re equally happy to move if they can do better.

There are three main reasons why people look to make a move from their existing bank. Firstly, they’re after a better deal. Secondly, they may be unhappy with the service they’re getting. And thirdly, because their existing bank can’t or won’t lend them the money they want to progress their plans. Or it may be a combination of these three factors.

Whatever your reasons for considering a shift, you’ll still be wanting to get the sharpest possible deal. If your current bank will give you this, great. But, if not, it may be time to consider a change.

The reality is that your bank is not going to risk losing you if the interest rate you can get down the road is better. We’d much rather see you remain with your current lender than have you swap and we’ll do our best to keep things sweet. Once we go into bat on your behalf they’ll often come to the party and match their competitors.

But where they’re unlikely to be able to compete is when the bank down the road is offering a sizable cash contribution to attract your mortgage. Currently, if you have a $400,000 – $500,000 loan, we’ve been negotiating $4,000, in some cases even $5,000, to lure you across. It’s significant coin. If the bank you’re with can only match the best interest rate in town, which is the same as their competitor, and it’s only going to cost you say $800 in legal fees to move your mortgage, the cash contribution remaining of some $3,000 to $4,000 is a powerful incentive for many to switch. For a possible maximum of three hours of your personal time it’s a significant hourly rate, and the benefits don’t always stop there.

match fixing

When we negotiate rates with your bank and your new bank there is a point where you can’t keep going back from one bank to the other asking them to match and better the other. Our approach with negotiating with the banks, particularly if you’re looking to change is to make it very well known to your existing bank that you’re looking to move, that you are shopping and have asked us to look at other offers, and that there is a very, very high chance that they may lose your business. We emphasize that they must put their best foot forward. We will very rarely go back and give them another shot. After all, do you really want to stay when they’re holding out on you? And as we’ve already highlighted, your existing bank can’t compete with the cash contribution so if that’s the motivator, the decision is easy – you’re going to move.

pricing versus service and other qualitative considerations

It’s however not always about price. Other factors can and should enter the equation. Let’s face it, some banks do it better than others. Some banks provide better service, or may have more ATMs in certain locations, or have a nicer banking environment. Some banks offer greater flexibility without you facing early repayment recovery costs to pay extra during a fixed rate period. There may be philanthropic considerations. Banks support many worthwhile causes and endeavours and some may be close to heart.

Okay, so you’ve factored all these things in and decided to switch banks but despite the benefits you’re worried about the hassle.

switching banks is easy

If there’s one thing banks have got down to a fine art it’s moving customers from one bank to another. Banks have a streamlined switching process which in almost all cases the process is relatively hassle-free and the gains can be significant.

Changing your mortgage can save you heaps of money through sharper interest rates, reduced fees, and giving you the opportunity to change your loan term and structure to get mortgage free quicker.

We know you’re busy and we’re committed to making the process seamless and hassle-free. We have years of experience helping people make successful mortgage switches and are here to walk you through the process. You can sit back and trust all the detail to your Awesome Mortgages team, a trusty lawyer, and banking professionals committed to making the change effortless.

First of all we’ll be negotiating the sharpest possible rates and benefits. Once we’ve applied to the new bank on your behalf, gained an approval, analysed the best structure, and the background work is in place, it’s a simple matter of getting you all set up. Just five easy steps is all it takes: application, approval, acceptance, signing new documents and confirmation your new loan is in place.

if you’re thinking about switching your mortgage to a new bank here’s a few important things you need to know:

new loan documents

Once you’ve decided to make a move and firmed up a date to make the switch you’ll need to contact your lawyer, or we can contact them for you.

Don’t worry about any legal fees. These are in most cases $800 or less, and the cash contribution offered to attract your business will cover this – and more.

Your lawyer will contact your old bank and request from them what we refer to in the trade as a ‘discharge.’ This is the amount you’ll need to repay your existing mortgage on the day you switch.

If you have any repayments or interest accrued after your existing bank has given your lawyer the discharge figure or if there are any break costs these will be factored into the repayment costs to settle your existing loan.

Because you’re setting up a new mortgage the bank you’re moving to will prepare new loan documents which you’ll need to review and sign in the presence of your lawyer.

On the day of refinancing your lawyer will request from your new bank the sum needed to repay your old bank. Both your lawyer and your old bank will send you summary statements. So you will have a clear audit trail of the switch.

new bank accounts for your mortgage

You’ll need to set up new bank accounts. But there is no need to rush in. We’ll arrange for your new bank to contact you to tee-up a convenient time for you to call into a local branch. To make sure you are who you say you are (and to comply with new anti-money laundering requirements), you’ll need to take two forms of ID, and proof of your residential address (something like a utility bill linking your name/s to your address).

There will be a few forms to sign, new Eftpos cards and online banking to arrange and voila – you’re all set up. Oh, and don’t worry about setting up and transferring things like direct debits. Your new bank will do this for you. And if you would prefer they will even take care of closing your old bank accounts.

switching your other accounts

When you switch your mortgage you don’t always have to switch all your banking. Having said that, when banks are offering a sizable cash contribution to attract your mortgage then they generally expect you move the bank account you have your income or salary direct credited to and keep it there for a minimum of two years. Most people prefer to have accounts at only one bank because this simplifies the banking process.

It’s also easier to have the majority of your accounts in one place so that your payments and transfers go through more quickly. Having all your bank accounts under one roof also makes it easier to keep an eye on your balances so you don’t slip into overdraft or miss a payment which might affect your credit rating.

Your bank accounts don’t have to be switched the very same day as your mortgage is swapped. Banks will transition this to suit. You may prefer, for example – as one of clients recently did – to shift your salary account across and leave other personal accounts with your existing banks for a fixed period of time.

While banks might not make you switch all account in one go, for a really streamlined, hassle free approach it makes sense though, to move accounts sooner rather than later. You’ll often get a better deal with all your banking under one roof.

Shopping around the banks can be complex, time consuming and frustrating. We’ll handle the stress, gladly do the running around for you, negotiate competitive interest rates and terms, and show you ways to reduce the amount of interest you pay – all for free.

Switch your mortgage, save money and get a home loan that fits your lifestyle – now and in the future and enjoy greener pastures.