Banks love it when clients refix their mortgages online. It's quick, it's efficient and it saves them money.
But the vast majority of people want to have a proper conversation before they make their refix decision, not after they've already locked themselves in, Campbell Hastie, chief at Hastie Mortgages says.
He says he is seeing more and more people wanting to have these conversations with an adviser before they make their refix decisions.
“Too many people are making these decisions in isolation, often just clicking whatever option their existing bank suggests, without considering whether it suits their situation.”
Hastie had a recent client who had been doing this for the past decade. Whilst it hadn't been a disaster, it hadn't been optimal.
The problem became obvious when his 3.4% rate was due to roll off onto about 5%, he says. That's still a reasonable rate historically, but when applied to a $750,000 mortgage, that jump represents a significant increase in monthly payments.
“If he'd split his mortgage years ago, he could have spread this impact out – maybe taking some of the pain last year and some next year, rather than copping it all at once.
“Because he'd been doing everything himself through his banking app, he'd never considered splitting as an option.”
“A bank's online system doesn't exactly walk clients through strategic mortgage planning – it just lets them pick a rate and term. Job done, from its perspective,” Hastie says.
What you can't do online
Most people don't realise that online refixing only covers the basics. “They can set their rate and choose a term, and that's about it.
“They can’t restructure their loans, adjust split arrangements, add revolving credit or switch from principal and interest to interest only for a while."
Hastie says he regularly has conversations with people who are anticipating changes in their lives –planning renovations, considering a career change, or thinking about investment property.
“These situations often call for tweaking the mortgage structure, not just picking a new rate.”
The other limitation is more fundamental: companies and trusts can't refix online at all. Those with a mortgage held in a business structure, are going to need to talk to someone regardless.
The real cost of going it alone
What drives this point home for Hastie is the conversations he has with new clients whose mortgage arrangements are completely out of whack with their circumstances.
“Usually, it's because they haven't talked to anyone about their mortgage for years – they've just been clicking their way through each refix without any strategic thinking.
“I'm not saying people can't refix online – plenty of people know exactly what they want to do and are confident in their decision. For them, the DIY approach works fine.”
But for many, he says a refix decision might look deceptively simple on the surface, but how they got to that decision – and whether it actually suits their situation – is often more complex than it appears.
If circumstances have changed since the last refix, then that's where a proper conversation with an adviser pays dividends.
Search
