Avalon’s Money Thread: Can I get a decent affordable mortgage?
Filed under: Avalon's Money Thread, Interest Rates, Credit Cards & Mortgages in NZ
I’m a sick puppy; I think mortgages are really interesting once you understand how they work! The Anita Bell Mortgage book is really the best thing there is for explaining it all (Other than my book of course) and reading that will put you streets ahead when you have to go asking banks for shed loads of money to buy your own piece of beachfront New Zealand.
Firstly it’s always worth negotiating with the banks over your mortgage. The more you need to borrow the more clout you have, so don’t be shy. The worst that can happen is they say no and they may well say yes!
I got 0.5% off my variable rate on the Revolving Credit mortgage (that’s the ASB orbit account) and I also negotiated a refund on the monthly fee of $10 but forgot to negotiate a refund on ALL fees, so I do still have to pay $2.00 a time to set up automatic or bill payments I’m currently paying 9.05% instead of 9.55%, that’s on a mortgage of $100k. This is variable so goes up and down as the bank rate changes, but I stay 0.5% below the advertised ASB rate at all times.
I got 0.25% of the 2 year fixed rate so I’m paying 7.42% instead of 7.67% that’s on $165K.
Note: Current rates are 6.4% on the variable rate and 5.42% on the fixed rate mortgage. As discussed before here, we have also reduced the level of the mortgage by over $120,000 by using the tricks we learned.
I also got an agreement to refund all fees payable on my parents and brothers NZ accounts, up to $20 a month on each account.
AND – I got my first year Credit card fees removed, as well as the fee for joining the Credit card reward program. All in all, over the first two years, it is saving quite a packet.
A lot of what reductions you can get depends on the numbers – $265k mortgage is quite high. But my top tip, even if you aren’t looking at anywhere near that much is: shop around and TALK to the mortgage managers. I had 6-7 meetings with the guy at ASB; asking loads of questions about how things work in NZ. I also knew what I wanted to do to save money because I have read Anita Bells books on the subject a few times I built up quite a relationship with the guy before we ever signed on the line!
If anyone is patronising, or doesn’t give you the time of day, walk and go to the next bank or even another branch of the same bank. With ANZ I never got further than a first meeting with for this reason, that and they will give a measly 0.1% discount on the rate and charge you for it! Westpac nearly got my banking business, except when I was passed on to the “personal Relationship manager” and he was utterly obnoxious! Patronising and arrogant and he spoke to me as if I was 12 years old with a piggy bank! Bear in mind at this point I was well on the way to getting my finances sorted, had budgeted till I was blue in the face and could tell exactly what I had in the bank to the cent. I was not a happy bunny.
One thing I would suggest is ask every bank for quotes, and ask then them all to negotiate. I rapidly took two banks off my list because they wouldn’t move on rates (ANZ and HSBC). You will rapidly get to know what the deal is and get a feel for the best way to structure the mortgage.
The main options for mortgages are:
Fixed Rate Mortgages (fixed for 6 months up to 5 years – some now for up to 10 years)
Flexible rate Mortgages (your bog-standard old fashioned normal type mortgage)
Revolving credit accounts. (See below)
Be aware that you can split your mortgage into chunks, fixing some for different lengths of time, having some on a normal flexible mortgage, or some on a “Revolving Credit” (See next note). This is something I found really bizarre, because we just don’t have this in the UK. But to be honest I really like it. I just split mine into 2, but I’m due to look at it again in July07 and I’m thinking of doing a three way split: some on Revolving, a 1yr fixed rate, and a 2 yr fixed rate. It means you have a bit more flexibility to work with interest rate changes, and by splitting the mortgage up you can pay off your mortgage faster by making the overall interest rate lower.
QUOTE: Paying fortnightly instead of monthly is a very smart way to reduce mortgage costs.
Too right! We don’t do this because of the way we have ours set up it actually doesn’t give us an advantage. With a revolving mortgage often at a higher interest rate, you need to keep all your pennies in that account as long as possible. If you don’t have one of them, fortnightly is better.
If you use the “fine tune your loan” calculator on Westpac It will show you exactly how much money you can save between a monthly mortgage and splitting the amount in half and paying that fortnightly. Plug in the numbers for a monthly mortgage and hit calculate. That tells you the monthly payments and how much interest you pay overall. Under “Change payment frequency” – click option [a] (half monthly amount paid fortnightly) and hit recalculate. It then tells in nice friendly red letters just how much you save overall and how much time you just knocked off your mortgage. If that doesn’t make Mortgages interesting – nothing will.