An economist’s top tips for getting the best mortgage deal

Coming off her COVID-19 era fixed-rate mortgage in April this year, Mardiasmo received a nasty shock: her mortgage rate was set to jump a massive 4 per cent.

“I did the maths and I went, ‘Oh my goodness, where am I going to find an extra $900?’”

“Even though we know that it’s going to happen, it’s still a shock seeing it goes from 2.1 to 6.1 per cent.”

While the extra $900 a month was challenging, Mardiasmo knew she was one of the lucky ones.

“The mortgage on my property is quite low, it’s under $300,000,” she said. “If I had a mortgage of $500,000 or 600,000, I’d be trying to find almost $2,000 to make my next payment.”

In the end, careful strategising enabled the chief economist to cut her additional mortgage payments to just $400 per month – a saving of $500.

Here are her tips for maximising savings when refinancing a mortgage.

1. Don’t get distracted

The mortgage refinancing journey can be overwhelming, and the plethora of online advertisements can throw off even the most experienced mortgage hunters.

“I’m a chief economist in this field, and even for me it was a bit of a minefield,” Mardiasmo confessed.

“The first thing I did – and I would not advise anyone to do this – is to Google ‘refinancing low interest rate.’”

As soon as she did this, Mardiasmo was immediately bombarded with advertisements.

“After I Googled that, my Facebook feed, my Instagram feed, every social media feed was filled with mortgage brokerage or banks or any other lender with their ad of, ‘You can get lower interest with us’.”

Instead of succumbing to the chaos of online offers, Mardiasmo advised going straight to qualified mortgage brokers.

2. Work with multiple mortgage brokers

When so much money depends on your choice of mortgage lender, it’s essential to get as much information as possible.

“Being the researcher that I am, I didn’t just go to one mortgage broker – I went to three mortgage brokers,” said Mardiasmo.

Having three mortgage brokers to advise her allowed the chief economist to see a wider range of options, and cross-analyse the results to find a common recommendation.

3. Create a cheat sheet

To get the most out of your mortgage broker, Mardiasmo recommended creating a “cheat sheet” of all the crucial financial details.

When on call with the mortgage broker, she advised those seeking to refinance to have the cheat sheet beside them so that essential information can be conveyed straightaway.

Information to list on the cheat sheet include: the amount on your current loan, your percentage in the loan, how many more years are left, assets, liabilities and credit cards.

“Apparently, I was a dream client because I knew my numbers,” Mardiasmo said.

4. Compare results

After her conversations with the three mortgage brokers, the chief economist hoped a common product would emerge. Instead, she received nine different recommendations, three from each mortgage broker.

“I then had to go, ‘OK, how do I narrow down from nine to one?”

To make this decision, Mardiasmo created a spreadsheet with all the variables: interest rates, cashback offers, mortgage offsets, cost of leaving the current mortgage holder, legal paperwork, annual fees, and registration fees.

5. Translate it into cash

As well as including offers and percentages, Mardiasmo made sure to translate every single term into real cash.

“It’s about figuring out what’s important to you and actually doing the maths,” she said.

“Say, for example, a product says our variable rate is 6 per cent, there’s no cashback, and our produc is 6.15 per cent but there’s a $4,000 cashback. What does that difference in interest variable actually mean dollar-wise?”

It requires a few hours sitting down with a calculator; Mardiasmo emphasised that taking the time to do the maths is worth it.

6. Add upcoming extras

Mortgage refinancing is the perfect time to consider streamlining any other personal loans that might be coming up.

In Mardiasmo’s case, refinancing her mortgage was the perfect opportunity to loan a little more to cover an upcoming expense.

“I knew that I wanted a new car, because my current one was on it’s last legs,” she stated. “I could project out that the new car might cost an extra however many thousand, and so I actually put that on top of the home financing loan, so that it would be that one loan rate as opposed to having two separate loans and paying extra.”

Upcoming holidays, credit card debts, and other costs can also be added onto a home loan.

7. Repeat

“These days, refinancing is not a once-every-10-years matter – it’s not once every two or three years,” said the chief economist.

“It can be scary because of the unknown, of the type of products and how to handle all of those products,” she said, while also acknowledging the amount of time and labour that goes into making a mortgage decision.

However, keeping on top of the research and staying vigilant can result in savings of hundreds of dollars every month.

“Once you break it down into actual dollar figures, it starts to make sense,” she stated.

Listen to the full conversation with Mardiasmo here.