Refinancing my home loan

By Heidi Armstrong

Q. I’m aware that lenders make their big bucks off of big loans.  Can I get a good deal on refinancing my loan that is well on its way towards being repaid?

A. Yes you can.  Certainly any lender would love to lend a million dollars to a qualified person.  A very tiny margin on a loan like that adds up to a lot.  But the banks can hardly be bothered with the little stuff.  By the time they work out the cost of all their overheads, they simply lose money on writing the little loans.  As a result, don’t expect much a deal from them if you want to finance just a couple hundred thousand dollars!

A typical bank has a very high standard home loan interest rate.  That’s what the ‘little guys’ get to pay.  But they will provide ‘wealth package’ discounts for the borrowers with the bigger loans.  Those borrowers have to pay an annual fee for the discount, but they end up better off than the bank customers with small loans.

But other lenders, typically the non-banks, will provide rates that are even lower than the banks’ wealth package rates to all of their borrowers!  One rate fits all, because it’s already the lowest margin that they can provide and still be a profitable company.

Where then should the big borrowers go?  The same place!  Among the non-banks you will find excellent loan products at rates that are lower than the banks’ wealth package rates, and often with lower annual fees.