Borrower Apathy & Hidden Costs - Get Smart Advice to Find The Best Home Loan

Oct. 25, 2009 - PRLog -- In the past 12 months the differences between lenders have become quite stark and there is now a significant disparity between lenders on interest rates, fees and credit policies according to the group.

As Australians come to grips with the latest interest rate rise, Smartline Personal Mortgage Advisers Managing Director, Chris Acret, suggests now is the time for borrowers to shop around to compare home loans  and make sure they are securing potential savings.

“There tends to be a widespread view that all banks are the same, offering pretty much the exact same products with the exact same requirements,” Mr Acret said.

“However, when you make comparisons between lenders, it quickly becomes clear they are not all the same.  Borrowers can potentially save thousands of dollars by shopping around for a the home loan deal that better suits their needs.”

Mr Acret said that one of the more significant differences between lenders related to credit policy.

“On the upper end of the scale, there are lenders requesting an LVR (Loan to Value ratio, or value of the property) of 88 per cent with a deposit of 12 per cent, compared with a lender at the other end of the scale that is requesting only a 5 per cent deposit,” he said.

“If you paid a 12 per cent deposit on your dream home valued at $500,000, for example, the lender would require $60,000 – versus $25,000 if you were required to pay 5 per cent of the property’s value.

“Also, once the LVR is more than 80 per cent, the LMI (Lenders Mortgage Insurance) premium kicks in – and this, too, varies between lenders.”

How much can be borrowed can also significantly differ between the banks.

“Someone earning $60,000 per annum may only be able to borrow $250,000 with one lender compared with $300,000 if they approached another lender,” Mr Acret said.

The difference between lenders on variable and fixed rates appears small, but Mr Acret says the variation when applied to a loan warranted borrowers’ attention.

“The disparity between variable rates from the various lenders is roughly around a quarter of a per cent and for fixed rates it’s roughly half of a per cent, depending on the term,” he said.

“While this doesn’t sound like much of a gap, if we look at say 7.79 per cent versus 7.59 per cent, for example, and apply that to a $300,000 loan you’re adding up to $600 per year to the cost of servicing that loan.

“Over five years, that may add up to $3000, which could fund extra loan repayments or a family holiday.

“If we look at this over the life of the average 30 year loan, you could be saving approximately $14,850.”

Mr Acret also warned borrowers that cheaper interest rates could attract large upfront fees or a large exit fee and urged caution.

“Not shopping around has the potential to cost you dearly,” he said. “But, a ‘health check’ with an experienced mortgage broker who has access to information on loans from multiple lenders can be invaluable.”

•   For more information contact Chris Acret on (02) 9855 4200 or cacret@smartline.com.au

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About Smartline

Established in 1999, Smartline is a multi award winning franchised mortgage broking group, having built a unique reputation for advice and client care.

The group’s 200 franchise offices have assisted over 100,000 Australians arrange their home finance to date. 85% of Smartline's business comes from a personal recommendation. As part of every loan Smartline arranges, the company donates $10 to charity.

Smartline’s Managing Director is Mr Chris Acret and its Executive Director is Mr Joe Sirianni.