Friday, November 5, 2010

Top 4 Tips to Beat Bank Mortgages

With the mood turning completely against the banks this week, especially the Commonwealth Bank for raising more of their fair share of the rate rise, the Barefoot Investor recently shared four tips to beat banks at their game. 
1. Make sure you understand any potential exit fees that you may be charged if you choose to switch, and use this as a basis to compare any new loan.
2. If you’ve bought a home in the last three years, check to see that you’re not going to be recharged Lenders Mortgage Insurance (LMI). One of the dirty tricks of the industry is that if you switch banks, the new lender will hit you with LMI again – even if your bank uses the same insurer.
It’s like paying car insurance twice. And it can cost you thousands more than any exit penalty (are you listening Mister Swan?).
3. Make sure you go to a mortgage broker that rebates to you the dirty little kickbacks that the banks pay to grease the palms of the people who flog its products.
Ensure their policy is to rebate the entire trailing commission and that they apply it to your principle. Over the life of your loan, this can slash tens of thousands of dollars in interest and years off your mortgage.
4. A while back I had the opportunity to chat to Ken Fisher, a self-made billionaire, and one of the most influential money managers on the planet – here’s the gist of what was said.
Barefoot: “If you could only invest in one Australian company – what would it be?”
Fisher: “A bank. Buy any of them. Buy all of them – they’ve basically got a license to print money. There’s not much competition, they’re paying great returns to shareholders, and your nation’s prosperity is all but underwritten by China”.
He’s got a point. My mortgage went up this week, but hopefully so did the dividends on my bank shares. If you can’t beat them, join them!
In your dealings with the banks, what tips would you give a first homebuyer such as myself? 

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