I heard something quite shocking this week.
Now I was expecting interest rate rises but not at the scale I was told this week
Morgans Stockbroking have told their clients that they expect 9 rate rises.
It gets worse.
Because they expect 9 rate rises in the next 9 months. Crikey.
Now we all know our bankers are greedy so they are no chance they will not pass the rate rise or pass on only a partial rate rise. In some cases don’t be surprised if the rate rise by your bank is more than the official rate rise.
That means borrowers will get a letter from their bank EVERY month saying their mortgage and business loan payments have gone up and whatever they have left in their pockets will be gone. Nothing can be more depressing than that.
So many will decide it may be time to refinance and move to another greedy lender in the hope of saving a few dollars.
Sounds perfect. Except it may not be.
I have found that many clients change or refinance thinking it will save them money but in fact, does the exact opposite because they did not read the small print or not realised what moving lenders meant.
So here is the rundown. Think about and find out the following before your leave your greedy bank for another greedy bank.
• Exit fees
These can be payable on loans especially if there is a term period. Eg your loan agreement may say that if you repay your loan within 5 years an exit fee is payable.
• The Awful Lender’s Mortgage Insurance.
This is where greedy bankers make their money. Many may charge lenders a higher rate because the bank think they are risky. That makes sense. So, if they are compensated by charging a higher rate why do they insist lenders also take out mortgage insurance?
Mortgage insurance is usually payable if lenders have a deposit of 20% or less. The bank will insist lenders take this insurance out and the bank will get its money back from the insurance company if the lender defaults. In other words, the bank benefits and the lender loses out. Sound familiar?
• Termination fees
Many lenders charge a termination or discharge fee in the event the loan is repaid early.
• Break Cost
If you have a fixed rate of interest loan and decide to repay your loan, the bank may charge you a break fee.
• Application fees
If you apply for a new loan, there is a chance that the lender will charge you a fee for organising the loan.
• Valuation fees
If you are refinancing a home or building, then the new lender is likely to want a valuation of the building.
• Registration fee
This is a fee not charged by the banks but by the state.
In the old days, you had to go to the Registry Office, complete a form, get it stamped and then in large ledger the name of the bank who lent you money would be entered.
That process took time and effort in terms of labour.
Today this is all done electronically but that does not stop the States from charging a fee.
• Settlement fees
Just another excuse to charge a fee. This is a fee that charged because a lender completes the transaction. Ask for an explanation of why it is charged and you will never get an answer. But you must pay it anyway