Well, be careful because you may be the kind of person Mortgage Reduction scheme companies are looking for. Don’t get me wrong, it can actually be done, it just takes money and discipline. But some Mortgage Brokers will have you think you need a special type of loan, that only they can offer you, to accomplish it.
Some of the ones to watch out for will start with a telemarketer calling you at home telling you they can help you save tens of thousands of dollars on your mortgage repayments. They will say they cut years off your mortgage without you having to make extra repayments.
When the consultant comes to your home, he/she won’t tell you this, but their aim is to be in your house for at least 3 to 4 hours, going through your finances and all the information with you. It doesn’t need to take that long, but dragging out, is part of their technique to get you to sign with them before they leave.
How they waste your time.
The majority of the presentation will by hype, they will start by building a rapport with you so you feel you can trust them. They will then explain a little about the company they represent. In actual fact, they will be blowing their own trumpet telling you that they are their to help you achieve your goals, unlike the banks that are only in it to make money. It’s true, the banks want to make money, but don’t think the consultant and the company they represent isn’t going to make a whole lot of money from you if sign with them, they will simply present it in a way that you don’t really notice the money you’re paying them, not to mention the money they will make from the lender that refinances your mortgage.
They will tell you that this is a little known trick that the banks don’t tell you about, but that they will share the secret with you. However, they will tell you that you have to refinance your mortgage to do it. They will also tell you that you won’t have to increase your payments, you simply have to use their Line of Credit loan with their Credit Card that has an interest free period. You just have to pay all you salary directly into your Line of Credit account and pay all your regular expenses with the Credit Card. The Credit Card will then be repaid at the end of each month, using the money from your Line of Credit. They will present this in a way to make you think the way you pay your mortgage off faster is simply because your pay has been sitting in the Line of Credit account until you need it to pay off your Credit Card. Because interest is calculated on the daily account balance, this will result in less interest being charged each month. This is true, and it is likely to save you some money, but it isn’t what dramatically cuts years of your mortgage. This is done by the surplus money you leave in your loan account, effectively, the extra repayments you have made.
When they get to the end, they will ask you a series of leading questions and all of a sudden it will seem like you’ve agreed to go ahead and they’ll start pulling out the paperwork to fill out. They want you to feel obligated because they’ve spent so much time showing you how much money they can save you. If you say you want to think about it they might make you feel foolish for not jumping at this opportunity on the spot. Or they'll imply you have wasted their time making the appointment when you weren’t really serious about saving money.
Here’s the secret!
Don’t let them con you. The little known fact that they don’t want you to know is that you can achieve the same result with any Home Loan that has a redraw facility and there are plenty of fee free credit cards that offer an interest free period. Even if your Home Loan doesn’t have a redraw facility, your lender may have a loan you can switch to that does, for much less than the cost of refinancing.
They want you to refinance your mortgage because the lender will pay them a fee for this and will also pay them a percentage of the interest paid on your mortgage. It may be beneficial for you to refinance your mortgage, but make sure first so you don’t go through the expense and hassle for something you could have done with your current lender.
A final thought.
If in doubt, get professional advice or speak to a couple of mortgage brokers before making a decision. If they are trying to pressure you to proceed on the spot, it’s probably because they know if you have a chance to think about it or talk to someone, you may not go ahead with it. If it’s a genuine offer there shouldn’t be any problem with taking time to think about it and even comparing it to what another broker can offer.
What makes me an expert?
I don’t profess to be an expert, but I have worked in the banking industry for 22 years and I know how home loans work. I also had the misfortune to come across one of these “Mortgage Reduction Specialists” who teach people how to go into your home and pressure you to refinance your mortgage. But you don’t need to take my word for it, do a search on the internet with the words ‘mortgage’ ‘reduction’ ‘scheme’ and you’ll find plenty of information.