banking

How "faster" and "easier" can cost you thousands

Twenty-first century banking has arrived, but amidst its speed and efficiency there’s a trap waiting for unsuspecting banking customers.  

 

Here’s my observation: Banks are increasingly trying to make things faster and easier, particularly when it comes to re-fixing your loan or signing up for new products. This of course is awesome if you want to make things fast and easy. It is also a technology-led tsunami that simply won't stop.

 

But here is a question to throw a spanner in the works: Where is the advice?

 

The problem with "Click here to lock in a two-year rate at x.xx per cent ... oh, and if you do it now you can get free fries with that" is that a two-year rate may not be best for you. If rates have dropped should you keep the payments the same?  Have your circumstances changed in the past two years? What are your plans for the next two years? Moving? Kids? New business? The answers to these questions all determine if clicking that button is good for you.

 

Getting good advice can make a huge difference.

 

I had some clients recently who were about to "click the button" when we intervened just in time. They were about to fix for two years, however, their income had doubled since they took out their loan and they had been given $20,000 in an inheritance that was sitting in a savings account.

 

With some quick intervention in their home loan structure they managed to half the length of their mortgage and saved them over $250k in interest over the life of their loan. And it wasn't a big, drawn-out process either.

 

Banks are awesome when they give us money to buy houses and when we need credit cards. However, as consumers, I think we all need to be taking advice before making significant financial decisions.

 

As mortgage (and insurance) advisers our job is to work alongside the banks and give that advice and make recommendations to our clients based on their situation.

 

Before you "click that button" give us a ring.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Letters to Tully #4: Watching your Bank Account

Listen in as Graham “educates” his eldest child on the ins and outs of buying investment property. Lesson #4: Watching Your Bank Account.

 

Dear Tully,

This month’s tip is about keeping an eye on your bank account. 

To kick off, let me tell you about rent weeks. If you own a house that is rented out, there are a maximum of 52 weeks in a given year in which to collect rent. If it is occupied 100 per cent of the time, you get 52 rent weeks.

People often ask me how many rent weeks they can expect to have on their rental property, which, of course, is another way of asking “how many rent weeks will I not collect each year?” 

 

We did a survey in the office … we have 20 houses between four of us. 

 

20 houses x 52 rent weeks gives 1040 total rent weeks that we could receive, but how many will we actually receive?

 

When we tallied up the total weeks, it turned out that we got 1020. That's right, we were just 20 rent weeks short over all the 20 houses. One of the houses accounted 13 of those weeks. This was a house in Christchurch. The staff member at the time had an average property manager but she did not keep an eye on the bank account. It took her three months to discover that she wasn't getting the rent from the house. 

 

The two things that come out of our little survey are 1) that houses stay rented pretty much all the time. You will have some vacancies, but clean, warm and appropriately priced houses stay rented. And 2) keep an eye on that bank account. That's where you’ll see if anything is going wrong.

 

That's all. Cheers!

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.