Thursday, January 5, 2012

How well do you know your mortgage?

Speaking as only an insider can, I am always horrified by just how many mortgages have incorrect specifications against them. By specifications I mean interest rate details, margin discounts, dates for changes etc. And so many of my customers have no idea exactly what is wrong. The ones who are paying attention pick up that something is wrong, and generally they just pin it on the interest rate, but usually the problem runs deeper. And by the way - do not be one of those people who is adamant that the interest calculations are wrong. That's about the only thing that NEVER goes wrong. If the rate is right, the calculation is right.
See, alot of the parameters of your mortgage is loaded completely manually by an entry level worker behind the scenes. Interest calculations are about the only automatic part of the shebang. Limited time discounts, tiered lending/saving (rates that get higher or lower depending on the balance), honeymoon rates, even interest only periods rolling over to principal and interest eventually - depending on the company you have your finances with, and good their systems are, some/alot of this could be set up manually. And although it would be easy to blame it on human error, alot of the time the systems being used are so complex, and have changed so many times over the years of use, that sometimes the issue isn't apparent until later on down the track. Sometimes it wasn't even human error, a system upgrade 2 years ago created functionality that caused your loan conditions to act in a different way.

A discount that should have expired never does - and you get stuck paying back interest saved you were not entitled too when the bank finally notices.
An interest only period that should have run for 5 years somehow only runs for 2, or even worse runs indefinitely - meaning you never end up paying off the loan.
A discount that should apply to a variable loan once the fixed rate period expires never got loaded in the first place, or is loaded incorrectly so you never end up with the discount you were entitled to.

These are only some of the potential things that go wrong. And whats so frustrating is that the loan you thought you had nailed when the broker/bank consultant helped you set it up years/months ago, might actually no longer be correct even though no-one has touched it since.

My tip to you? Do a bi-annual health check of your loans. Check the current rate against the advertised rates on the banks website, and check them again against your loan contract for special agreements/conditions that were relevant at the time you signed - especially since a special offer that you qualified for then will not be reflected on the website. Every time your loan goes through a cycle - ie interest only to principal and interest, fixed to variable, or vice versa - check it again. People don't mean to make mistakes but they happen. Pay extra attention to any discounts you were entitled to, as these are often off the advertised standard variable rate.
Speaking from my own employers perspective, once an issue is brought to our attention, the issue is fixed for the customer that raised it, and reports are run to locate other impacted customers so that they can be fixed as well. Even if the issue is found other ways other than the customer raising it, it is still corrected promptly. I'm sure most of the banks do the same. It is still worth your while to keep an eye on what is happening. Ditto for your savings accounts.

**Have you found an issue with your mortgage before? Did the bank fix it promptly?**

1 comment:

  1. its things like this elise lol.
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