Simply shopping for the lowest interest rate is a Scam!
Major banks and leading lenders love to quote and sell us on interest rates. They then set us up with multiple banking accounts, so we never leave, and then happily have us sailing along for the next 30 years.
Did you know that on a $500,000 home/investment loan you will repay (over the term of the loan) $1,137,722. That is a whopping 125% return for the bank.
After ten years you would only have paid off $76,984, but paid the bank $302,256 in profit, or should I say interest.
The same home loan, as quoted above, at 1% p.a higher over 15 years is a total of $834,311.
The banks would love to convince you that it is all about the rate.
This is not to say that rate is not important, it is. But I would like to highlight that there are so many other equally important variables that can save you a lot of money, if set up and structured correctly.
In the example quoted, an interest rate that was 1% more expensive, posted a saving of $303,411.
It’s food for thought.
I’ll go further, if you log onto your internet banking account and set up a recurring extra payment of $10 per week into your home loan, or 100% offset account (depending on your overall strategy) you will save $30,728 in interest, on a $500,000 loan.
And we haven’t even looked at all the loan and banking fees. Establish a budget today and set in motion an automated debt reduction plan. Start small, the savings are huge.