One of my mottoes in life is ‘Don’t ask, don’t get’. (Others include ‘Don’t stoop to pick up nothing – but that’s a dating motto).
You may remember I did a financial makeover with my friends Sonia and Todd a few weeks back (which was great; you should totally read it here).
One of the outstanding issues was their incorrect home loan. They were in an investor loan product, not an owner-occupier one.
Why does this matter? Back when they got the loan four years ago, it may not have. The interest rates may have been similar.
But the regulators have since cracked down on the banks, wanting them to lend less to investors. The banks responded by ratcheting up the interest rates on investor loans, to make them less attractive.
This is actually pretty cheeky for current customers. They already have the loan, so the price signal isn’t going to change demand. This is called ‘repricing their back-book’, and it’s arguably a cash grab. But who’d have thought a bank would do something questionable like that?
Anyway, I digress. When Sonia told me her interest rate, it sounded super high (well over 5%). I told her to call up the bank and negotiate a lower one.
This is something you can totally do. Seriously.
The last thing your bank wants is to lose all that lovely interest you’re paying them … for like the next 20 years. Because it’s such a long-term loan, most people forget about their rate after a few years, even if competitors are dropping their prices.
So if the lender sniffs the scent of a customer wanting to leave, they will usually go hard to keep you. They often have special retention teams, whose job it is to keep you in love with them. Ok, so they don’t buy you fancy lingerie and a sexy weekend away, but maybe they should.
Anyway, when Sonia calls up her bank, she finds out about the investor loan thing. Now, let’s remember every statement goes to the same address as the address of the loan. So how could that be an investment property?
Nonetheless, they are like, “Ooops, sorry for having you in a wrong, expensive loan for four years, let me just swap you over to the right one with a heaps lower rate”. Job done.
OR WAS IT?
I would not let this lie. I urged Sonia to follow it up. Was it the mortgage broker or the lender who stuffed it up? Were they going to give her back the money it cost her being in the wrong product?
Turns out the bank and broker both ‘fessed up to making a mistake.
And then they gave her a refund. Not like ‘a free dessert when the kitchen stuffs up your main course’ kinda refund. A full $6000 back in their pockets.
They even rang me up and sang me a daggy song about being a good friend. Which is really all anyone wants in life right?
What’s the lesson here?
I’d take a few actually:
- Even professionals can get it wrong. Banks (and any service company) may not deliberately rip you off, but mistakes happen. Always read your statements, ask questions, shop around, and get a second opinion if you can. I was only able to spot this mistake because I spent a year working in a mortgage company, so try and speak to people who are in the know.
- Talking about money is not taboo. I know people who’ll share intimate details of their sex life but never reveal how much debt they carry. But, just like sex, the more we keep our money matters in the dark, the less chance we have to learn from one another. I’m not encouraging you to gloat about how much you dropped on a new outfit; I’m asking you to talk about your lessons, challenges and battles with the people you trust.
- Don’t ask, don’t get. I know, there was a spoiler for this one in the opening. But let me say it again: if you don’t ask questions, demand refunds or search for better deals, you will pay too much. The worst thing anyone can say is no. My advice? Approach your finances with the confidence of an average white guy chatting up a way hotter woman.