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Lender/Broker Trick |
What to do |
| Discharging your mortgage... |
The standard process at one of the big 4 banks is not to action the discharge request form when received from the customer, but to instead put the customer into a retention program – once in this program, it can take the bank up to 7-14 days to contact the customer. And when they do contact the customer, it's to try and convince them to stay with the bank. This can hold up settlement for the customer, and keep them in an expensive home loan for longer. |
To overcome this, phone up your current lender once the discharge form has been submitted. Request that they discharge your mortgage immediately, and to take you out of any retention programs. |
| A regular practice by lenders is dragging out loan discharge requests, and/or making it complicated for the customer to leave. One of the big 4 banks has multiple fax numbers for existing customers – one for discharges specifically and one for everything else. Faxing the discharge form to the wrong fax number essentially means the discharge request is ignored. |
The easiest thing to do when the discharge process is difficult is to walk into your nearest branch and physically hand in the papers; also phone regularly for updates. |
| Hidden set up fees... |
Some brokers/lenders may gloss over the fees involved in applying for a loan, resulting in the customer not being fully aware of the costs. After an application has been done, the customer finds out that a hefty application fee will be charged – by then it's too costly for the customer to pull out and try a cheaper lender. |
Double check all fees before submitting an application. Also ask the lender for the loan's comparison rate. If the comparison rate is higher than the interest rate, this indicates that there are set up and/or ongoing fees for the loan. |
| Submitting multiple home loan applications... |
Some brokers may submit your application to multiple lenders at the one time. Each time an application is processed by a lender, a credit check is performed on the customer. This damages the customers credit file. Once a few credit enquiries appear on the customers file, lenders will start declining the application due to an active credit file. This forces the customer to choose one of the earlier lenders. |
Go through all options with your broker first, and request that they hold off sending in any applications until you select the product best suited to you. |
| When you're committed to the loan application… |
Some lenders/brokers will imply that once formal approval has been given on a loan, the borrowers are committed to proceed through to settlement. |
There is no obligation for you to continue with the loan until settlement. However, double check if any fees will be payable if you decide not to proceed. |
| Broker payments… |
Brokers are paid a commission from lenders to sell their products. It may be tempting to some brokers to steer customers towards a lender/loan product which pays the highest commission, rather than the product which best suits the customers needs. |
Do your own research to back up your brokers suggestions. If you agree that the product offered by the broker suits your needs, then proceed with the application. If you find a better product, ask your broker about it. Remember: Brokers do not have access to every loan product in Australia. There are various lenders that only deal direct with their customers in order to save costs and deliver a better priced home loan. These lenders are called Direct Lenders and MyRate is the leading Direct Lender in Australia. |