Five ways to work out if your bank is ripping you off

BORROWERS need to check their lender is not ripping them off despite the Reserve Bank of Australia keeping the cash rate on hold.

HOME loan customers could be getting ripped off and don’t even realise.

The Reserve Bank of Australia board has kept the cash rate on hold today at 1.5 per cent — where it has sat since August 2016 — but borrowers are being urged to get off their backsides and check exactly fees and charges they are paying.

Here’s five things you must know about your mortgage or face getting gouged by your bank.

1. INTEREST RATES

Many interest rate deals remain under the four per cent mark and borrowers are being warned if they are paying anything above this they need to take urgent action.

Home Loan Experts’ managing director Otto Dargan said, “There’s been a lot of movement of interest rates in the last few years.”

Home Loan Experts managing director Otto Dargan said there’s plenty of hot home loan deals under four per cent.

“You can check your interest rate in internet banking and if it’s over 4 per cent for a home loan or over 4.5 per cent for an investment loan,’’ he said.

“Then you should definitely consider refinancing or calling your lender to renegotiate your rate.”

2. LOAN TERMS

The typical loan term is 30 years but some financial institutions offer loan terms as long as 40 years.

This results in the customers having lower minimum monthly repayments but consequently they end up paying much bigger interest amounts.

Mr Dargan said “less than one per cent of loans have a term under 30 years.”

If you are refinancing also be careful, lenders can sneakily sign you back to a 30-year loan term but you are well within your rights to demand a shorter loan term if you wish.

3. MINIMUM REPAYMENTS

Borrowers might be kicking up their heels and revelling in the low interest rate environment by making minimum monthly repayments.

Making the minimum repayments on home loans can result in much higher interest charges.

But Mr Dargan said, “most people are making the minimum repayments and are unaware of how much they can save by paying extra.”

“Just $100 a month extra on a $500,000 home loan will save you around $30,475 in interest over 30 years,’’ he said.

4. BE DEMANDING

Home loan auction platform Loan Dolphin’s chief executive officer Ranin Mendis said borrowers should regularly review their home loan interest rates and ask for a better deal from their bank if they are on a variable rate loan.

LoanDolphin chief executive officer Ranin Mendis said customers should regularly demand a better deal from their bank.

“It’s always best to call up your own bank first and squeeze them for a further rate discount,’’ he said.

“If they don’t, it’s best to walk out.

“Refinancing is not as hard as applying for a new loan, it’s more streamlined and refined compared to a few years back.”

5. FIX YOUR RATE

Locking in your home loan rate can sometimes result in savings and Mr Mendis said this can lead to savings.

“It’s probably best to think about betting against the banks and fixing part of the mortgage,’’ he said.

“All related data indicates that the rates should be heading north.”

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@sophieelsworth