Whatever the reason you decide you want to up sticks and move houses, you would do well to remind yourself that the cost to move homes doesn’t simply start and finish with the difference it may have cost you to upgrade to new digs.

That’s because the cost of moving can be surprising, unless you’re well prepared for it. Of course, this will vary depending on your individual situation, but costs can add up to around five per cent of the actual purchase price of a new home.

So if you are moving, consider the following potential costs in your budget:

Real estate agents fees

When you sell your old home the agents fees can vary greatly and can range from anything between 1% and up to 5%. And in some instances you can also expect to have additional advertising costs on top – which is why it pays to shop around for agents who can genuinely offer you the best all-round deal.

Stamp duty

If you’re moving to a new home you’re unlikely to be eligible for first home buyer stamp duty concessions, so the cost of stamp duty can be hefty. The amount will vary from state to state and on the cost of the new property and is usually the second biggest cost in buying a new home, after the purchase price.

Solicitors or Conveyancing fees.

Unless you do it yourself you will need to account for these for both selling your old property and buying the new one. Again the fees can vary greatly.

Removalists costs

Hunt around and compare costs between companies as these can fluctuate markedly depending on the size of the move and the kind of service you use. Some companies provide you with a choice between a flat fee or an hourly rate when quoting. Either way, it can be as high as $5,000 for a big move or less than $500 if you hire a truck and do it yourself.

Loan costs

If your loan is portable you may be able to take it with you, but there’s still likely to be valuation and legal fees for the new property. Likewise if you’re refinancing or taking out a new loan, you may be liable for application fees, legal fees and valuation fees – as well as any costs for discharging your previous loan. Finally, depending on your circumstances you may also have to pay for lenders mortgage insurance, if you’re borrowing more than 80 per cent of the value of the new property.

Bridging Finance

If you buy your new home before you sell your old and there is a period in between where you are technically in ownership of both properties – you may need to apply for and pay for bridging finance until your old property is sold.

Building and pest inspections

Seen by many as an essential cost where costs can vary depending on the inspector and the size of the home.

Property Improvements

This is an open chequebook situation and will vary according to whether you think you’re going to get a return on your investment in terms of a higher sale price from the work you put in. You may also need to make essential changes to your new home as well – if there are major maintenance issues.

So stop now and ask yourself, have you taken the time to do some homework and find out more about who’s actually going to lend you that money? Because if you haven’t yet considered this, there’s no better time than now to find out why its so important.

By conducting some initial research, you can find out quite a bit about the way a lender does business and avoid any unnecessary concerns that might otherwise arise during the course of the relationship.

Because it’s important for you to understand when you sign up with a lender – you’re not just buying the product, but the service as well.  

Where a loan may look good on paper, you also need to be able to rely on the right lending representative to guide you through all the mechanics of the loan to ensure you continue to get the most out of your lender, your loan and the relationship.

And although education is a powerful tool – not every lender is willing to make the time and effort to help empower you over time to take more ownership of your financial decisions.

So before taking out a home loan, there’s some simple checks you can make. These include:

Visiting the lender’s website

By doing this you can establish how long they’ve been in business, products they offer, interest rates, industry memberships and the people behind the business and its history.

Asking around

A good way to measure the quality of a company’s products and services are through word of mouth. Ask a broad range of friends, family and business associates if they’ve had dealings with the company you’re considering, and if so, how they found the experience.

Obtain a copy of the credit contract for your loan

By doing this you can look at the terms of the loan and your obligations to determine if you will be able to meet them. The credit contract will also outline any fees associated with changing loans – and if you do have any concerns, seek some independent legal and financial advice.

Organise a face-to-face meeting with a company representative

After conducting some preliminary research, set up a meeting with a lender from your organisation of choice. Come armed with any questions and queries your earlier research may have unearthed.

Check that the lender is a member of the Credit Ombudsman Service Limited (COSL)

This service protects the rights of any borrowers who deal with a COSL member and allows them to take a complaint they may have against that lender to an independent dispute resolution body. 

And finally – if you don’t feel comfortable with the direction your lender is taking you, don’t sign on the dotted line. There are many good lenders out there and the buck really does stop with you.

With some lenders passing on rate rises outside of the RBA cycle, finding a bargain standard variable interest rate (SVR) is now a little more challenging.

However when you compare the current SVR of the big four banks against other lenders such as non-banks, credit unions and building societies, the difference in most cases still remains largely in favour of lenders outside the banks who can still offer rates which on average are around .50% lower.

But despite this, some mortgage providers are still advertising rates even lower than that and well below that of the big four banks, which should make you ask questions about how this rate can be offered in the first place and then how it will be sustained.

It’s understandable that the propensity for borrowers to look for the lowest rate will remain for some time, due to the fact that we’re still considerably geared in terms of what we owe – but whatever deal catches your eye, you need to read the fine print and ask questions first before you sign anything.

There are a few basic principles to remember when you’re hunting around for a better deal:

HOW DOES THE RATE COMPARE TO THE MARKET?

Identify if the interest rate sits within the most common standard variable interest rate band in the marketplace i.e. around that of the big four banks and key non-banks. If the rate you are looking at is substantially lower, it should be enough to make you dig a little deeper.

A good place to start is by going to websites such as www.infochoice.com.au, www.cannex.com.au or www.ratecity.com.au where the most up-to-date rates are generally shown.  Then once you find a rate and a loan you think is appropriate for your circumstances, go to that specific mortgage provider’s website and check if the information is consistent.

LOOK AT THE COMPARISON RATE?

Don’t be taken in by the annual percentage rate only – you must read the comparison rate as an indication of the loan’s total cost. You may find fees and charges that didn’t factor into the headline rate. The difference once this is taken into account, may make the perceived savings on a low rate negligible, even within the first year.

WHAT WILL HAPPEN WITH THE RATE IN THE FUTURE?

If an advertised interest rate is unusually low then you need to seek some kind of guarantee that further rate rises will reflect the movements from other similar providers in order to give you comfort and confidence to move forward with the product. Without this guarantee you may find the rate increasing substantially outside of the RBA cycle.

WHAT IS THE  SERVICE PROPOSITION?

Because borrowers are so generally rate focused, it’s important to remember not to neglect the other key aspects of obtaining a loan that can also save money and time including the features of the loan and the standard of service provided by the lender.

With the announcement of a sixth rate rise by the Reserve Bank, these borrowers will be forced to look outside the square for ways to fund the increase in their mortgage repayments and will have to assess all aspects of their lifestyle and spending habits.

When lending rates decreased dramatically in the wake of the GFC, instead of using the opportunity to pay more off their mortgage, some of the highly leveraged borrowers became a little too complacent and slipped into old spending habits – and it is largely this group who are now feeling the pinch.

Although talk about rates often focuses on the average loan of $300,000, there are a surprising number of borrowers in major capital cities with mortgages commonly between $400,000-$600,000, who framed their credit and loan arrangements around interest rate levels twelve months ago and are now having to service around $330-$500 more in monthly mortgage repayments since October.

Indeed, some of those borrowers may have been hit with more than that rise in repayments as some lenders increased their rates beyond the official rate rise. So, when you do have a look at the overall financial impact on any borrower, it’s clear to see that some will be really feeling the pressure to find that extra money – with the added prospect of more rises to come.

CHANGES TO MONTHLY MORTGAGE REPAYMENTS ON DIFFERENT LOAN SIZES (FROM SEPTEMBER 2009- APRIL 30, 2010)

Notes:

1. Repayments are based on a loan term of 25 years
2. The interest rate outlined is the average SVR of the big four banks

The key issue is that borrower behaviour over the last twelve months has seen two distinct patterns emerge among mortgage holders. The first group is those who have been financially disciplined to seize the opportunity to start paying more off their mortgage, and the second is those who have used the reprieve in rates to relax and re-claim old lifestyle habits – and it is this group that is now most at risk.

However, regardless of where a borrower now finds themselves, it’s clear that now is the time to make the necessary changes to get back on track by applying the necessary financial discipline to plan ahead for a rising rate cycle that may be in place for several years.

There are numerous options which can save households money and improve their overall cash flow, including:

• Eliminating multiple credit cards and reducing existing card limits.  Borrowers should then aim to  pay off or reduce any form of high interest credit.
• Revising plans to renovate your existing house or rescheduling those plans for later when rates are lower.
• Considering whether you can alter the structure of your mortgage to save interest by making fortnightly payments instead of monthly, thereby making more payments over the year.
• Keeping a record of all your spending and expenses for a month and looking at where you can make obvious cut-backs.
• Being smarter about when and where you purchase your food and petrol in order to save money.
• Keeping discretionary spending to a minimum to get back on track and then, only paying cash for items as you can afford them.
• Looking at utility bills and working out how you can reduce your phone, gas and electricity usage.
• Deciding whether you can affect your household earnings by changing the way you are paid so that it improves cash flow and allows you manage your household income more simply.

Whilst it’s common for many borrowers to occasionally feel frustrated by their mortgage, it is another thing altogether to determine whether it’s financially worth acting and the time is right to move to greener pastures.

The main issue for borrowers is taking time out to look around and see what else is available and many times this doesn’t happen until someone tells you what a good deal they’re on – and it stirs you into action.

But there are several triggers that you can identify prior to reaching this point:

1. When you look at comparable loans, is your rate still competitive?
2. When you look at your loan features, are they still suitable for your current circumstances or are  you paying for features you don’t need anymore?
3. Are you satisfied with the level of customer service with your lender? Do they know you personally enough to provide direction to you on reaching your financial goals – or do you feel like just another customer?
4. When you do hear good stories about other lenders and loan options, are you constantly  feeling  like you have nothing to brag about in relation to your own?

The critical step then is to look at the break costs on your current loan to calculate if switching loans is financially worth it.

If there is a break cost you need to see if it can be easily recouped with the interest you will save over the first few months of taking out a new loan.

Now that Australia is in a rising rate environment and there is more competition between lenders for a borrower’s business, the incentive to refinance is significantly greater than it was two years ago when the mortgage landscape was dramatically different.

However, the stumbling block for many mortgage holders is that they’re so busy juggling their finances they don’t take the time instead to think about whether they can change the actual terms of those finances to make the juggle easier.

A borrower only has to consider what benefits they can gain from refinancing i.e. potentially saving tens of thousands of dollars in interest over the life of a loan and giving them more flexibility over their household cash-flow to convince them that the time may be right.

Just like shopping centres give you a centralised place to compare prices sales and deals for clothes, most people would like a one-stop loan shop to provide opportunity for you to compare and contrast the loan products that best suit your situation. 

There are a lot of websites out there that provide an abundance of information to guide you through the home loan maze but they also report on competition in the home loan industry. Websites such as Info Choice, Rate City, Your Mortgage and Your Investment Property are good places to start.

Other websites which have only been available in the past year or two and also worth a visit are Mozo, Money Buddy and Home Loan Hints. Also check out Resi’s informative videos on My Home.

Also, don’t forget to flick through the financial and property sections of your weekly paper.  This is usually a good starting point for your research into the right home loan for you.  Your national paper will also have an abundance of budgeting tips and market news and can give you an idea of how much houses are selling for in your area of interest.

However that as a result of this industry re-alignment, the borrower will be the clear winner and will benefit from a wider product choice, more concentrated levels of customer service and clearer segmentation across the lending market.

No-one will argue that the last two years has provided challenges for all lenders, but the upside is that that same period has also created new opportunities for established lenders with a multi- disciplinary business model to evolve and reinvigorate the entire customer proposition for borrowers.

The consolidation that has occurred within the non-bank sector has strengthened the future for competition to remain in the market and allows the non-bank hallmark of innovation to continue – an industry element which is essential to ensuring customers have real choice.

A decrease in loan-to-value ratios across the industry has affected all lenders but the upside is that non-banks are now in a position to offer greater discounted rates whilst still retaining a decent margin, simply because most don’t have to juggle the competing interests of borrowers and shareholders.

The last twelve months has also seen the gap between standard variable rates of the major banks increase to more than a quarter of a percent,  making the bank benchmark a less reliable indicator of what’s competitive across the market and leading borrowers to revise their search of both loans and lenders.

Loan volumes have markedly increased for the non-banks during this last quarter which may be largely attributed to that shifting benchmark but it’s also abundantly clear that an increase in the level of dissatisfaction by bank customers is allowing us to claw back some of our previous market share.

With some key industry players still revising their distribution channels, there is still significant change and effect that is yet to be felt by the market and this is likely to have some further impact on borrower behavior.

The effect that consumer sentiment has had on the mortgage industry over the last two years has been largely underestimated, so with more change to come, this effect has yet to be fully played out and is set to be one of the key market differentials for 2010.

Their award winning product, Switch & Save tops competition within the non-bank category not only because of its current low variable introductory rate of 5.70%* but also thanks to its competitive revert rate that kicks in after 24 months and no start-up or ongoing fees.

These attributes as well as its other winning features including extra repayments, free redraw, and an interest only option has made it rise above other non-bank lenders.

The initial introductory rate for Switch & Save is discounted at 5.70%*, which is a variable introductory rate over two years – well below much of the bank and other non-bank competition. It’s the latter cost with a default rate of 6%* as well as its low start up and nil ongoing fees that helped Resi rise above the other non-bank lenders.

This results in potential savings of $4,839* over three years, $5,698* after five years and an enormous $14,330* over ten years compared to the average cost of the average loan according to Your Mortgage rankings.

 For more information on Resi’s Switch & Save home loan visit, http://www.resi.com.au/Landing/Switch—Save.aspx?t=home_banner_large

Or if you have an existing loan and want to put it up against the Switch & Save test then try Resi’s Switch & Save calculator http://www.resi.com.au/Calculators/Switch-and-Save.aspx?t=HP_banner_right.

* Conditions Apply.

Comparing the standard variable rates of the big four banks to get an average ‘benchmark’ rate has been a commonly used way for borrowers to know if they were getting a good deal from their lender, but it is now becoming increasingly irrelevant.

As the gap between standard variable rates of the major banks widens to more than a quarter of a percent, that benchmark will continue to become a less reliable indicator of what’s competitive across the market, leading borrowers to look at the whole playing field to see what’s available to them.

And as the alignment between bank rates continues to fragment, this now means more borrowers must consider the rates of all lenders as well as placing value on the service and features that go with a loan – both of which can make a significant difference to their back pocket.

The statistics speak for themselves and paint a clear picture of what has happened to many borrowers just by looking at the difference in standard variable rates (SVRs) of the four major banks at various times over the last year:

Difference in standard variable rates (SVR) of the big four banks at specific times

The last three months alone have seen the difference between the highest and lowest standard variable rates of the banking majors blow out to more than a quarter of one percent, which is also the equivalent of one official rate rise of $47 per month in repayments on an average $300,000 loan.

These fluctuating benchmark rates will make borrowers not depend on it as a key factor in their decision making, but will instead lead them back to looking at their loan arrangements to see how they can customise a solution for their situation by looking at rates, features and service.

Websites such as Infochoice and RateCity are useful starting points for consumers wanting independent comparisons of what different lending institutions are offering.

It’s a great time for existing borrowers to see if their loan still stacks up by looking at the whole – and not just a sum of its parts.

With rates now widening between loan providers and some borrowers feeling frustrated at an absence of customer empathy from their lender, now is the ideal time of year to decide whether you can work within the features of your existing mortgage to improve your cash flow. Or if you’re better off cutting your losses and paying break fees if necessary, by refinancing to a more appropriate loan and lender.

Consumers can save money over the long term by considering a range of simple options.

They include switching to fortnightly payments instead of monthly, which not only lessens the impact of paying one large lump sum each month but also means your loan is paid off sooner.

It also includes consolidating any lingering credit card debt which is accruing high interest of up to twenty per cent into your mortgage, allowing you to concentrate on paying off one lower interest loan.

Another option is directing any savings from other accounts onto a mortgage, thus lowering the principal. If you then look at these changes and still find they won’t materially improve your finances or that your circumstances have changed too much for them to make any significant impact – that’s when it may be time start looking around for a more customised solution in the form of a new loan with a better rate, more appropriate loan features or more genuine customer support.