If you have been banking with your current lender for more then 10 years, then it may be that you have a dose of misguided loyalty to that lender, and they love it! In a recent Canstar Blue consumer survey it was revealed that 75% of respondents were satisfied with the customer service at their bank.

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Is that it? Only 75%!

I also suspect that it is much lower then this number if the respondents were to dig deeper into the loans they had, found out exactly what they were paying for and what they were really using. You should not assume that your lender is offering you a great credit card and home loan rate, you need to know for sure.

What can you do about it? To see if you pass the misguided loyalty test, answer the following three questions. If you can not confidently answer each one with a yes, then you fail the test:-

1. Do you know what the exact interest rate is on your current home loan?
2. Do you know what loan features you have and if so, are you are using what you are paying for?
3. Has your local bank manager has contacted you in the last two years to say hello and see how you are going with your home loan?

Don’t line your lenders pockets! Paying off your mortgage is one of the smartest things you can do for yourself and your family. Here is a three step plan of action to make sure you are on the way to being mortgage free:-

1. Know your numbers. How much principal did you pay off last month compared to interest? Knowing this number will give you a true sense of how much better you may be able to do with a more suitable home loan.
2. Tidy up your budget. The extra effort put into identifying where you can find an extra $100 per month can take years off the life of your loan. If you can couple this with a better rate then you may be well ahead of the eight ball.
3. Motivate yourself. In order for this to work you will need to print out your amortization schedule, this is a table showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of the term. Check out the great calculator on the following site, amortization schedule calculator. Use this to keep track of your mortgage payments and note the difference that extra payments make to the loan term and interest charged.

On a final note, you should know that the real cost of your mortgage is the opportunity cost. The estimated ‘real’ cost of your home is three times what you repay, that is three houses or if you are comfortable with misguided loyalty, one house for you and two for the bank. Extra repayments short circuit your amortization schedule because an extra 10% off your mortgage payments may be five years off your loan term.

If you feel you have been betrayed by your lender and are guilty of having a misguided loyalty, if you need help to work out your numbers, or if you would like some advice on which loan may be suitable for you, please give me a call on 0439 663744 and we’ll see what you may be able to save.