How to get a discount on your home loan

How to get a discount on your home loan

It‘s a question all borrowers ask themselves: How can I get the best

possible deal on my home loan? With thousands of loan

configurations available every day from mortgage lenders in Australia,

it can be difficult to know exactly which is the best one for you.

Many claim to have the best rates or the most award-winning deals,

but which offers the most value for each specific customer?

Then there’s the stress of the unknown – is

it time to fully or partially fix a loan by

locking in the interest rate paid for a set

period? And should that be for one, two,

three or five years?

The truth is that home loan offers change

constantly. When it comes to deals, today’s

caviar can quickly becomes tomorrow’s fish

paste. But there are some fundamental

rules that borrowers need to follow to put

themselves in the best position to take

advantage of meaningful discounts.

Technology plays a major role these days –

home loan hunters have access to

information that was once tightly held by

banks, accountants, mortgage brokers and

financial advisors. These established players

have refused to pass on this knowledge to their

customers and have become rich through buyer

ignorance.

We established uno Home Loans in 2016 to

make transparent the information that kept

buyers in the dark for decades. We’re

passionate about offering advice and assistance

to help find the best possible deal for you.

unohomeloans.com.au offers a range of owner-

occupier and investor loans from major and

specialist lenders, allowing you to compare rates

and features. Our staff, who are paid by salary

not commission, work on your behalf to find the

ideal mortgage package every time.

To find out more, contact uno Home Loans at unohomeloans.com.au or 133 866. 01

Jason Azzopardi

uno’s Chief Financial

Officer and Head of

Home Loans

Jason Azzopardi has more than 20

years’ experience working in private

practice and the big banks. In this

ebook, he offers inside tricks and tips

to help those wanting to find the best

possible refinance or new home loan

for their situation.

How the system worksNot all home loans are created equal. Financial institutions look at a number of

factors to determine what kind of deals they will offer individual customers.

The first variable is the loan amount, which

is divided in segments – usually “up to

$500,000”, “$500,000 to $750,000” and

“$750,000 plus”. The larger the loan size,

the more bargaining power you have.

The next part of the equation is your loan-

to-value ratio (LVR). You’re in a good

bargaining position if the amount you’re

borrowing is less than 80 per cent of the

value of the property you are looking to buy

or refinance. So if you have an LVR of less

than 80 and you’re looking to borrow more

than $750,000, you should be in a prime

position to negotiate the best possible deal.

Another factor is how you plan to make

your repayments – either principal and

interest or interest only. Loans that are

interest only, where borrowers are not

required to pay anything off the principal for

a predetermined period, sound attractive for

those with short-term cash flow issues or

investors wanting to claim a tax deduction.

But uno has developed a calculator that

shows how principal-and-interest loans with

a lower interest rate can be a much better

option in some circumstances (even for

investors, who benefit from income tax

deductions on the interest component);

paying off the balance of the loan can save

money from year one.

Something else borrowers might not be

aware of are “non-binding requests”. These

are specific pricing requests that all brokers,

including those at uno, might make to a

lender on your behalf. This is

effectively a negotiation based on your

financial strength and the number of

competitive options available to you in the

mortgage market. The lender will agree to a

better deal if they want your business badly

enough. This is something you should

discuss with your uno mortgage adviser.

To find out more, contact uno Home

Loans at unohomeloans.com.au

or 133 866.

If you have a larger home loan or a low

loan-to-value ratio, know that you

might have more bargaining power to

get a highly competitive deal.

Tip:

Turning the screwsBanks don’t enjoy losing customers and their retention tactics can often be quite

aggressive. Those going through the process of refinancing a home loan can expect

a call from someone at their old bank offering a “better” deal than the one that

persuaded them to try to leave in the first place. Lenders know that even matching

the new offer might be enough to persuade some customers to stay because moving

seems to involve a lot of paperwork and hassle. Bank loyalists who are offered a

lower interest-rate might even convince themselves that they’ve had a “win”.

Customers are often their worst enemies

in these situations. They can convince

themselves that, because their transaction

accounts, credit cards or personal loans

are with a particular financial institution, it

would be too complicated or expensive to

move their mortgage to another lender…

even if staying is costing them money

each and every year.

It's a myth that people must shift all of

their accounts if they move their mortgage

elsewhere. In fact, they can usually leave

everything as it is – the direct debit for

that new home loan can come straight out

of their existing transaction account. In

most cases, it’s not difficult or costly to

move home loan accounts (just ask your

uno adviser how to do this).

Banks know those customers they value

the most and will offer them inducements

to stay, which can often result in a better

deal. But customers are much better off

testing the market by logging into the uno

website and comparing what other

lenders are offering in an effort to get their

business.

03

Tip:

Be open to having your

transaction accounts with

a different lender to your

home loan. It could save

you thousands a year.

“It's actually quite

straightforward to

change home loan

providers, and we

will arrange it all for

you.”

– uno’s Jason Azzopardi

Exclusive offersThe relationship between the big four banks, smaller lenders and mortgage

brokers has always been complex and confusing. While banks have their

own direct home loan offers that have traditionally dominated the market,

they provide finance for other lenders who must stay lean to be competitive.

All the while, brokers often sell mortgage packages from their “preferred

suppliers”, rather than canvassing all lenders in the market for the best deal,

to customers who are often unaware that the two organisations have a

financial arrangement.

But it would be wrong to think that banks offer

their mortgages at different rates for different

brokers. This “channel conflict” would create a

massive problem for brokers who couldn’t offer

competitive options to their customers.

There are a few ways to get a deal that is better

than the one advertised by a lending institution:

through a non-binding request or selected,

exclusive offers via brokers. A particular bank

may give uno customers a special home loan

rate that is not advertised on broker rate cards.

Smaller or specialist lenders may also offer deals

that allow them to compete for attention with the

major banks. Often, a broker will agree to the

deal to attract customers, even if it means they

will lose revenue on the arrangement.

It’s always possible for a broker to play one

lender off against another. If uno knows it can

get, say, a five-year fixed rate for 3.99 per cent

from lender A, one of our mortgage advisers

might approach lender B and ask whether they

can beat that deal - say at an interest rate of

3.5 per cent. Lender B might not agree to this

request, but it could come back with a more

competitive offer.

uno regularly offers home loan deals that are

cheaper than those offered by the lenders

themselves, but customers can compare these

alongside the full range of mortgages on the

uno platform. Unlike other brokers, uno gives

its customers full disclosure and transparency

when it comes to its home loan offers.

Tip:

Ask your adviser if there are

any un-advertised offers or

discretionary pricing

available to you.

“We approach different

lenders directly, trying to

get special offers for our

customers”

– uno’s Jason Azzopardi

Concerns about the traditional broker modelMany industry stakeholders and commentators believe that the traditional

mortgage broker model, which sees brokers act as intermediaries between

lenders and customers, has always had a fundamental problem.

1. Are you showing me all of the home

loan options available to me?

2. How do you decide which is the best

option for me?

3. What inducements do you receive to

use a particular lender?

4. What commission will you be paid if

successful?

5. Can you negotiate a further discount

for me with this lender?

Tip:

Understand how commissions might

sway advice, and consider using an

adviser who isn’t personally paid sales

commissions (like uno’s advisers).

traditional brokers almost never get to see the full

range of home loan offers available to them.

They only ever find out about the ones their

broker chooses to show them.

In contrast, uno guarantees a fully transparent

view of the all of the loans available from every

lender we offer, giving our customers the power

to arrive at the best deal for them. As a company,

we receive commissions from lenders for loans

settled; however, the individual advisers who will

be helping you with a home loan do not receive

sales commissions. Instead, they’re remunerated

by salary. This means that the person who’s

assisting you with your home loan has no

immediate financial incentive to sell to you, give

you a larger loan than you need, or put you with a

particular provider.

Almost all brokers in Australia are paid by

commission (in contrast - uno’s advisors receive

a salary) and most lenders pay them about the

same – usually 60 to 65 basis points of the loan

amount. That’s the equivalent of about $6000 on

a $1 million loan, so their margins are tight. And

brokers get none of this unless the loan settles.

They also get a ~15-basis-point “trail” income on

the balance of each loan they sell. This means

that if someone doesn’t pay off the balance of

their mortgage for 30 years, their broker gets a

cut right through until the end of the loan term.

This might be good news for some brokers, but

there are concerns from outsiders that it’s

potentially not in the best interests of consumers.

Prospective borrowers who use

Questions to ask a mortgage broker:

05

Importance of timingOften, the opposite is true. A particular bank may

try to encourage borrowers in a certain segment

to take out a specific type of loan over, say, a

certain period. When interest rates are deemed

to be low and there is little immediate prospect

that they will rise quickly, lenders will offer

attractive fixed-rate deals to get customers

through the door.

For those seeking a better home loan deal, it

pays to know that lenders’ rates and offers

change regularly – often weekly. It’s important to

check uno’s website frequently to compare the

latest deals.

The product and pricing committee of each major

bank in Australia meets weekly. The men and

women on these committees look at the bank’s

margins and product mix and pull certain levers

to suit their commercial purposes at different

times.

It could be that they may need more deposits to

fund their lending book, so they’ll offer a more

attractive interest rate for investors. Or they might

put up interest rates to increase their profit

margins or change the deposit level for a specific

investment loan. Recently, for example,

regulators told banks to slash the number of new

interest-only loans they were offering to

customers, so many increased the rates for these

loans quickly and significantly to discourage take-

up.

Fact

The total value of

outstanding Australian

home loans is $1.664

trillion.

Source: RBA, May

2017

Tip:

Get advice from someone inside the industry. They should know that timing is everything and can use the lender’s current motivations to help you get a better deal.

Fact

Australia’s housing market is worth more than $6.6

trillion, an increase of $1 trillion over just two years.

Source: RBA, June 2017

Lender ‘scorecards’Another lever used by banking product and pricing committees is

what’s called the “scorecard”. This is where a lender takes into

account the financial circumstances of customers to assess their

credit risk, based on a number of factors. It also measures specific

areas of the property market – perhaps based on geography or

dwelling type – and makes it either easier or more difficult for these

customers to borrow money to buy in those segments.

Lenders’ scorecards determine how much

borrowing power a customer has when they

apply for a loan, and they’re often based on the

state of the market. An oversupply of property in

a certain area or an anticipated increase in

vacancy rates may present problems for those

seeking to buy apartments. In these cases,

lenders will make it more difficult for certain

customers to obtain loans for these purposes by,

for instance, raising the deposit level required.

The converse is also true, of course. First-home

buyers might be able to get a better deal if they

have more than 10 per cent deposit, have a

guarantor or are supported by a government

grant. What is “fashionable” for lenders can often

change quickly, and this has a dramatic effect on

a borrower’s bargaining power.

The best way to know what’s happening across

the market – to get the best options at any one

time – is by keeping track of uno’s changing

database of home loan offers on

unohomeloans.com.au and to contact a uno

adviser.

There’s something that those seeking a home loan can do to help them

push hard for a bargain – ensure they have a good credit rating.

If you only have a 5% deposit, this will

need to be “genuine” savings – not

dependent on your brother selling his car

or a loan from a friend. These are the

things that make lenders nervous.

If you’re in good financial health, and you

can prove it, you’ll be in a much stronger

negotiating position.

The key is to pay off credit cards on time and

have no other outstanding financial

commitments that may raise a flag with a

lending institution. You can check your credit

rating for free through companies such as

Veda; you can be sure prospective lenders will

be checking too.

It’s a good idea to review your financial

situation every few months. For those with

existing loans – even a mortgage – it’s easy to

“set and forget” the amount of money flying out

of a bank account every month. Refinancing or

consolidating a debt into a better loan structure

may save you hundreds of dollars a month and

cut years from your repayment schedule.

For those looking for a good deal to get into the

property market, the goal is to be more than

just “approvable”. Having enough savings to

cover a minimum 5 per cent deposit is just the

start – you also need to cover stamp duty and

legal fees that might reach $3000.

Tip:

Check your credit rating

and, if needed, make

changes to improve it

before you go deal-hunting.

A uno adviser can help you.

“When refinancing,

there's the money

you can save as well

as years off your

mortgage.”

– uno’s Jason Azzopardi

Getting your house in order

uno’s Better Deal Challenge*When we learned that more than 1 in 3 homeowners were not confident they

got the best deal on their home loan, we decided that had to change.

We believe customers deserve better from the

biggest financial transaction they’re likely to

make in a lifetime. So, we’re putting our money

where our mouth is: Even if you find a better deal

than the one we do, we’ll negotiate with our

lenders and endeavour to match it.

And, if that happens and you end up getting your

home loan through us, we’ll also pay the

difference between our proposed loan and the

better deal you found for a year. You can read

more about our Better Deal Challenge here, and

you can also speak to a uno adviser.

Tip:

If you’re still unsure whether you’re

getting the best deal, take uno’s Better

Deal Challenge.

09

How uno can helpConsumer-facing technology has changed the home loan landscape

for good… and for the better. It has put the power firmly in the hands

of customers, giving them unprecedented access to what Australia’s

large and specialist lenders are offering at all times.

Loan seekers can choose the features they want,

put their financial details securely into powerful

calculators to see what they might pay and

compare the full range of options to decide which

ones suit their specific needs. They can even

apply and get their loans approved online. And

they can do this whenever they want, using

whichever digital device they choose.

uno has taken this one step further. To take the

hassle out of finding the right home loan, its

mortgage experts are available seven days a

week to offer advice over the phone, via email

or live chat, and negotiate with mortgage

lenders. They are not paid commissions – they

are only motivated to land the best possible

deal for you.

What to do nextTo find out more, visit unohomeloans.com.au, start a live chat with an

adviser, or phone 133 866.

This information is general in nature, and you should always seek professional advice when making financial decisions.

* A Better Deal is a proposed loan with a lower total cost over a selected period. If the customer finds a Better Deal on a

Comparable Product and they go with uno, we’ll pay the difference of the monthly repayment amounts between uno’s proposed

loan and the customer's Better Deal for the first year after settlement. A customer's Better Deal must be evidenced to our

satisfaction within 72 hours of receiving a Credit Proposal. Subject to assessment, eligibility and terms & conditions. Approval not

guaranteed. Valid until 31/12/2017.

Tip:

Use technology to identify the

optimal options available to you.

“Our platform is constantly

updated with the thousands

of product variations flooding

the Australian home loan

market. It’s impossible for a

traditional broker to have

that amount of data in their

head.”

– uno’s Jason Azzopardi