With a headline like that, you're probably expecting me to be selling snake oil.
Certainly, any finance business making such a promise should be immediately investigated by the corporate cop, ASIC. Companies with financial services licenses aren't allow to offer promises of future returns because, correctly, ASIC knows the future is inherently uncertain.
Guarantees are for hucksters and charlatans.
Except this time.
Because I'm not trying to flog you snake oil. Or fancy black-box trading systems. Or time-share apartments or dodgy penny stocks.
I'm not trying to flog you anything at all.
Instead, I'm offering you something that, at worst, will cost you nothing, except for maybe 60 minutes of your time (5 minutes on this article and 55 minutes of work).
At best, it could 'make' you tens- or even hundreds of thousands of dollars.
I put 'make' in inverted commas, because while you'll be 5- or 6-figures better off, it's not through some spectacular return on a moonshot investment.
It's not a pyramid marketing scheme (though the pitch, thus far, does sound familiar, right?), and it doesn't require to to attend a cheesy (sleazy?) 'information night'.
It's your mortgage.
I'm fortunate to be doing a job I love, working in an industry with the power to really help people. And yet, when it comes to my own family, it took an appearance on Weekend Sunrise for me to really help out. (Maybe that's because I'm boring at family barbies…).
In any event, one of my family was watching when I suggested that viewers were getting ripped off by their banks. Not — in this case — by anything Royal Commission-worthy, but simply by not getting the best deal they could.
After the segment, I got a message from one of my family: "Should I ask my bank for a better rate?"
"Yes!" was my emphatic reply.
The result was that this particular family members is now paying $1,800 less, per year, in interest on their mortgage.
And before you simply multiply that by the average 30-year loan term (it's $54,000, to save you the trouble), that's only if you take the money and run. If you keep paying the same repayments as before, that saving actually compounds — so the $1,800 saving comes off the principal of the loan — meaning the next, say, 29 years worth of interest on that $1,800 disappears, saving you even more.
That example isn't an outlier: the loan above was already a pretty low rate, with a not-for-profit credit union. Safe to say, many, many people are starting from a higher base.
Let's do some numbers.
If you have a $500,000 mortgage…
And you get a 0.5% reduction in your interest rate…
…That'll save you almost $90,000 over the life of a 30-year loan.
Got a larger mortgage? Think you can drop your rate by more than 0.5%? You can see how easy it can add up. (For example: If your mortgage is $750,000 and you can save 0.6%, that's a $150,000 saving.)
Here's a start: I have my mortgage with Sydney Credit Union. Their current intro rate is 3.59% (3.63% comparison rate). If you're paying more than 4.09%, then you can — potentially — save more than 0.5%. What are you waiting for? And no, neither I nor The Motley Fool has a commercial relationship (outside my plain-vanilla bank accounts) with SCU.
The best bit? As I said at the top, any savings you make are guaranteed. No additional money at risk. No high-risk bets. Because it's simply a saving from money you would have otherwise paid.
Now, maybe you're already on the best possible rate. Maybe you've already shopped around. If so, great. You've already benefited from that 'guaranteed' saving. But from the people I talk to, you're in the very small minority.
I don't know the stats, but my guess is that 95% of people reading this are paying way more than they need to for their mortgage. How do I know? Well, because unless you're paying the very lowest rate in the market, you're paying too much — by definition.
Here's what to do, and how to do it:
- Find out — from your bank statement or internet banking — what rate you're paying
- Google 'best mortgage interest rates' and find out what your own bank is offering as an introductory rate, and the best rates being offered by the competitors
- Call your bank, and ask them for a better rate, so you don't have to leave
- If they don't come to the party, call the bank or credit union with the best rate and start the paperwork. Yes, it's not fun, but seriously — there could be hundreds of thousands of reasons to do it.
Foolish takeaway
So there you have it — the only ASIC-friendly guarantee in financial services.
And by the way, unlike capital gains or dividends, the saving is tax-free!
But you actually need to take action. Please don't put it off. Trust me — the banks don't need your money that badly.
Get even — get a better rate.
