Getting a better interest-rate deal
Why do banks offer better interest rates to some people than others? A friend just got hers fixed for super low but they wouldn’t do the same for us (same bank). What are the best ways to get lower mortgage rates? She would have more equity than us.
This is a question that’s especially frustrating for some first-home buyers. If you have less than 20 per cent deposit or equity, you usually won’t be able to qualify for the banks’ best special rates, and in some cases the bank will add a premium to the standard rate you pay, too.
You have the best chance of getting a good rate if you try to negotiate with the bank, have good levels of equity, clean bank account conduct and are willing to move all your banking business to the bank. You may find a competitor is willing to beat a rate to get your business.
What are the most important factors to focus on when deciding which bank to go with for a mortgage – beyond the obvious?
It depends a lot on what you value. In terms of the products themselves, most of the banks are pretty similar and there’s not a huge difference in interest rates charged.
Depending on what the market is like at the moment you apply for a mortgage though, each will have different appetite for lending.
One might have more capacity to lend while another might be tighter and as a result, a lot harder on applications. They each use slightly different servicing calculations, too, so you may be able to borrow more from one bank than from another. Sometimes one will offer cash back and the other won’t. You could also think about things like what their apps and online banking are like. If you know you’re going to want to be quite hands-on with managing your mortgage, perhaps having a revolving credit or refixing on short terms and regularly changing your repayments, you might value a bank that allows you a bit of extra flexibility.
What are some good/sensible things you can do with money once you’ve paid off your bills and have extra? Just saving doesn’t work. We are both a bit selfsabotaging with money because when you grow up poor you aren’t taught much about money other than how to budget and pay stuff off ... I feel like there is a bunch of stuff rich people do with money beyond saving that I know hardly anything about . . .
Saving is always a good start! But if it’s not working for you to have your money in a traditional savings account, there are some other things you could consider.
You could put some money into shares or managed funds. Platforms such as Sharesies and InvestNow allow you to do this with relatively small amounts. It’s higher risk than putting money in the bank but you can still access it when you need it.
If you want to stick with a bank, you could set up a savings account with another bank so it’s out of sight. You can sometimes ask that access be restricted so that you actually have to go into the branch to make a withdrawal.
Pay off your debt. Get rid of any credit card bills or consumer debt you’re carrying. The sooner you’re rid of it, the less interest you’ll pay all up. If you have a mortgage, bump up your payments to as high as you can handle. You could also get rid of your student loan at a faster rate.
Contribute more to your KiwiSaver – it’s something that won’t pay off until you buy a first home or retire but you’ll be grateful for it then.
Do you have a personal finance question you’d like answered? Email susan.edmunds@stuff.co.nz