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Don’t be wooed by home loan goodies
Jeannie Messer reports on the latest home loan fads that may cost more than the free giveaway!
November 23, 2009
In this era of new austerity, home loan customers are sticking to the basics. Bells and whistles are out, responsible borrowing is in. While the housing market remains strong thanks to historically low interest rates and the First Home Owners Grant, people are very cautious. And when it comes to home loans, many are putting security first, even when it means missing out on savings.
Before the credit crisis, the big four banks wrote about 60 percent of new mortgages. That figure has risen to 90 percent, even though their mortgages are not the most competitive.
In this climate, sweeteners are a good way for building societies and credit unions to get customers’ attention. Most of the goodies on offer are modest: holidays, pre-approved credit cards and discounts on home and contents insurance.
One of the more interesting deals is the Greater Building Society’s fuel rebate, offering six months’ of petrol savings for every $100,000 borrowed. The 50 cents per litre rebate is valid for 80 litres a week, so a $300,000 mortgage would mean savings of up to $160 month for 18 months.
The rebate is attached to a home loan with a 5.8 percent variable interest rate but if you reinvest these savings in your home loan, you can still come out ahead of other products with a cheaper rate. If you don’t use your car often you won’t get the full benefits of the deal, and the rate isn’t the cheapest on the market but if you consider the savings you can make, it’s worth investigating.
Some banks also give borrowers a chance to save money by bundling their mortgage with a savings account and credit card. It’s important to remember that opting for a package can make it harder for you to switch if a better deal comes up in future, but a well-structured package is worth considering as you search for the best home loan.
A recent survey by Roy Morgan Research showed that credit unions and building societies enjoy higher customer satisfaction than banks so it’s worth looking into special offers. Just remember:
- Read the fine print
- Look beyond short-term savings to the long-term value of the loan
- And weigh the costs of other features against the value of the special offers.
Because when it comes to home loans, sometimes less is less. And while it is important not to be distracted by sweeteners, they might just be the icing on a pretty good deal.
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