You know that old adage, “Ask and you shall receive”? What if I told you there was a tactic to get a home loan forgiveness that means you don’t even have to have ask.
And maybe a bigger one delivery than if you tried to haggle and beg.
It’s mortgage grace that doesn’t come too late for the tens of thousands of Australian households who have unwittingly – and probably still unknowingly – become trapped in a kind of “mortgage prison”.
What exactly do I mean by that? Well the latest rate hike brought the total hikes imposed by the Reserve Bank of Australia (RBA) to 250 basis points since May.
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The problem is that this is the exact amount of new mortgages taken out before October 6 of last year. stress tested at.
Stress tests refer to the income cushion you need to be able to refinance.
That’s what you gotta prove obtain approved.
Which means many households can no longer get re-approved and are locked into loans – increasingly expensive. (And yes, you might not know that yet.)
If the RBA’s bull run continues, mortgages taken out after October 6, 2021 will also become irremovable.
Since that date, lenders are required to apply a stress test of 300 basis points. So only two more 25 basis point hikes will see those borrowers locked in as well.
But just because you can’t switch to a cheaper lender – you’re very likely paying too much – doesn’t mean you can’t lower your interest rate.
There’s a simple trick to getting a (and probably significant) rate cut from your existing lender.
Without a complex and potentially stressful negotiation.
In a skillful money move.
How to get a mortgage discount in one step
Forget phoning and trying to play tough on interest rates: “I’ll go for a cheaper loan.” “I’m going.” “Promised…”
The most effective way to get a discount is to officially reveal a starting intention.
With mortgage refinancing hitting record highs in June and August, lenders are desperate to keep borrowers from abandoning them.
So jump online or call and say those magic words: Mortgage Release Authorization Form.
This is the document that tells your lender that you want to close your loan.
It’s game over for them.
And it inspires dedicated mortgage retention teams to spring into action to, yes, retain your custom. And interest.
You may need to name the product you could switch to.
This will give them the benchmark interest rate to match, so be aware that quality products comparable to a major bank mortgage are charged in the low 4% range.
Such offers exist at tic:toc and Well Home Loans, to name but two.
Note: These loans are guaranteed by approved deposit-taking institutions and not by non-bank lenders; they therefore carry real clearing accounts rather than disguised redraws. Remember that disguised withdrawals put people in difficulty at the start of the pandemic and the savings housed in these loans are not subject to the deposit guarantee of the Australian government.
“But I can’t GET a new loan”, you say
Vitally, without a reassessment of your repayment capacity for a new loan — that 250 or 300 basis point buffer check — your lender will have no idea if you might not qualify.
The fact that you couldn’t move has nothing to do with this situation.
All they know is that they don’t want you to.
Join the mortgage retention team.
Google the nation’s largest lender “CBA” and “Mortgage Refinance Authority” and you will find a page that even says: “Leaving to refinance? Make sure you get the most out of your CommBank home loan before considering refinancing. Call us on 1300 219 166.”
This statement couldn’t make it any clearer that they’re willing to make cost concessions.
But you’ll do better with this accurate Release Authorization Form.
And it’s as easy to cancel as it is to submit – indeed, there’s no need to even bother as the outgoing bank will NOT chase you to settle.
What you’re doing is calling your lender’s ultimate bluff.
They can’t see your cards.
If these cards don’t turn out to be winners – giving you at least a small discount, but I’ve heard of up to 242 basis points – you can just fold.
By that I mean, disregard the form; No problem.
Good luck.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and instagram.
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