Are offset accounts really all that valuable? Should you hold all of your loans with one bank, or spread the risk with various lenders?
We spoke to BARCO Financial Services director, Veronica Cook, to get to the bottom of four common mortgage myths – and her answers are more than a little surprising.
Myth 1: An offset home loan account can you save you lots of money.
Debunked: People often think having an offset account will save them money, but Cook points out that unless you have money sitting it in the account long-term, there is only a small benefit. “
This often confuses people as they believe if they have their pay go into the account it will help reduce their interest,” Cook says. “If the money is leaving the account as quickly as it goes in, the benefit is going to be minute, and they are not going to see huge changes.”
Myth 2: Banks will never negotiate or waive fees
Debunked: “I've had clients wanting to refinance because the costs associated with their loan, including monthly fees, were too high. We have looked around at other options and found better deals for them, and then approached their current lender to ask if they can match or better the offer,” Cook explains.
“Most of the major banks will do it on every occasion, and we have even obtained up to one percent interest rate discounts for some clients.” She adds that the level of negotiation does depend on individual circumstances, but it always pays to ask.
Myth 3: Property is only worth what someone will pay for it
Debunked: It’s a common saying in real estate but Cook says property is actually worth “what the valuer values it at”. “In the current economic client,” she adds, “valuers are tending to be very conservative.”
Myth 4: Having loans with different banks secures your assets
Debunked: Regardless of who you have your loans with, if you default on one of your loans and a lender needs to take further funding, they can make you sell your assets – even if your assets are with another lender.
For example, say you own two properties (house A and house B), and have each financed with a different lender (loan A and loan B). You default on loan A so the lender sells house A. There is an outstanding amount owing, so loan A lender can force the sale of house B with the loan B lender if they need to. “It just depends if they want the bad publicity!” Cook says.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan