Getting a loan

April- June 2008

This was my first loan. I had 2 months from auction until settlement.

Before this, I did not know what the RBA was. What they did on the first Tuesday of each month never influenced my life. I was in my own happy little bubble.

That all changed.

P had already been researching home loans and finding out which bank was offering the best rate and discount. He was able to get the best discount from Westpac of 0.83% off the SVR (standard variable rate - yes another term I learnt) with the package. Package? Where you pay an annual fee ($395 for Westpac) which entitles you to the discount, as well as other benefits like a fee free banking account and credit cards etc. Although he had done the research I also went to Mortgage Choice to get another opinion, just in case they could find a better deal, or if there was some discount I could get in relation to my profession. Turned out it was still the same so I was going to go directly with Westpac.

Until.

My accountant got in touch with me. Bad mistake on 2 points
- He advised me to prepay my loan. So what is prepay? As it was close to the end of financial year it meant that I paid the whole amount of interest for that year. Good point is that I get to claim back for the upcoming EOFY. Bad point - it was 3 years fixed.
- He knew a mortgage broker. The whole long story deserves another blog post. I'll write the start.
So I spoke to this mortgage broker and told him I wanted to go with Westpac. It was pretty easy for him as I already knew what I wanted. I didn't really understand the role of the mortgage broker at that time. I asked him the difference between going with the bank vs the broker and he said he would organise everything for me with settlement. I now know that brokers get a very nice commission. Also once you go with a broker, it's harder to deal directly with the bank.
I foolishly decided to go with him. On applying for the loan, he asked me to sign a form where I would need to pay $110. It did not make sense for me to pay extra as I knew which bank I wanted to go with but when I asked him what it was for, he said it was for credit card checks etc, and wouldn't even be that whole amount, so I signed it.
During this time, I was still learning about loans, the difference between fixed and variable, offset and prepayment. I didn't realise that you couldn't offset a fixed loan. Also prepaying a loan meant that you had to fix the loan.
After signing the loan, it was extremely difficult getting in contact with him.
I would be trying to phone or email him. As I couldn't get in contact with him, I was on the phone nearly every day to the Westpac Mortgage Centre.
He finally emails me to say he will be submitting my loan (without my authorisation of the type of loan/amount), asks me to provide the name of the Westpac person that had offerend the discount, and that it would be a Variable loan with an offset account. At one stage he also gave me the incorrect interest rates.
Coincidentally on the day he emails me, the lady from Westpac called me. She is much more helpful and informs me that you cannot prepay a loan with a Variable loan. It would have to be a 1-3 year fixed loan, and this can't be offset.
Having had enough of dealing with my mortgage broker I end up going in to see her that day and she manages to get me a discount of 0.85%. The next morning, a Saturday, I email my mortgage broker to say I would no longer require his services. After a week of not being able to call me, he calls me 2 hours after I email him. He is very rude. Later that afternoon he emails me again offering me $500. I refuse based on his lack of customer service and product knowledge.

Unfortunately due to these delays I am unable to change the amount of money split between fixed (which I can prepay) and variable (which I can offset), so I end up fixing the majority of my money.

Lessons learnt:
- Don't go with a mortgage broker
- You can get 2 loans for the one mortgage - so it can be a combination of fixed and variable.
- You can't offset a fixed loan.
- You can't prepay a variable loan.