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BLOG: How ignoring the small things can cost you $10k

02 AUG 2018 • By Phillip Tarrant • 3 min read • Investor Strategy

Some lenders can charge you a fee to get a discount on interest rates. Sounds good, yeah? However, if you don’t have your admin in order, this can create one big headache – one that cost us $10,000. Quite frankly, this whole thing pissed me off.

PHIL BLOG

What dominated my mental head space last week was messing around with a fee, a $300 fee that we have to pay in order to receive a professional discount on our interest rates with a particular lender, and the lender is the Commonwealth Bank.

This is a headache, but I just want this to be a lesson for our readers around getting your admin right, because I don’t think we got it right. In the end, it’s my fault because I didn’t have enough money in my account for the fee to get taken out.

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Let’s rewind a bit. Basically, every year we pay a subscription fee to a package set up by our mortgage broker. What happens is that a fee is supposed to be taken out from a certain account, but we don’t typically bank with the Commonwealth Bank.

My whole team started freaking out, as you rightfully would. We then stopped and had a think, going back to Ross, our mortgage broker, and asked him if he could look into it. Turns out we hadn’t paid the fee, which meant the six loans we had with the Commonwealth Bank were all bumped up to 1.5 per cent, which cost us in the long run.

 
 

The irony of it all is that I think the account where this fee comes out of is a bank account that I set up purely for the purpose of this $300 fee coming out of this account every single year. So, I’ve had the privilege of holding that account for $5 a month. And as you can read, I'm probably a bit annoyed about this because it’s an absolute joke.

So, I have to keep this account open so they can take a $300 fee out of it every single year. And at the point in time when they try to take that fee out, there was only $250 in the account. So they said, “You didn’t pay the fee, we’re jacking up your rates”.

We had to go through all the crap to try to get it reset and waste the time of our mortgage broker and the bank to get this reset. The irony of it is it happens every bloody year, and in the past, when it’s happened and we haven’t understood, it’s cost us on one particular property, about $7,000 or $10,000 more in interest by the time we got it reset. That’s an absolute joke.

It’s not a small portfolio we have. It’s not a massive portfolio, but it’s a considerable portfolio. There are so many different little moving parts of it. I mean, you think about a $300 fee potentially costing us – it has done in the past –  $10,000 in interest payments because of, I'm going to call it poor mismanagement on our behalf; I'm going to say it’s idiocy on behalf of the Commonwealth Bank to charge this rather than just letting me walk into a bank branch and pay cash or give them another account that they can take the money from.

No, they demanded that I had to have a Commonwealth Bank account and do that. So, I mean that’s an absolute joke. But they make the rules, and I’m the person that takes on the debt. So, yeah. It pissed me off.

But, if I was to learn anything about all of this, it’s about getting the small things right. So, if this can cost you that much money, it should be high on your agenda.

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Interest
Interest is the amount of money charged by a lender or financial institution for a loan, which is calculated as the percentage of the principal amount paid over the loan term.
Phillip Tarrant

Phillip Tarrant

AUTHOR

Phillip Tarrant is executive editor – Real Estate at Momentum Media. He is also an investor with a large property portfolio.

He leads the content strategy and corporate growth for a range of market and business intelligence platforms at Momentum Media, including Smart Property Investment – the authoritative voice for Australia’s property investment community.

As head of the Smart Property Investment Podcast Network, he also steers the largest network of property podcasts in Australia, which collectively generates nearly 2 million downloads every year.

There are over 2.6 million investment properties in Australia, with over 2.1 million Australians (or around 8 per cent of all Australians) owning one or more investment properties. A vibrant and critical sector for creating wealth for Australians, the property investment sector is expected to remain a pillar to the national economy.

For nearing a decade, under Phillip’s stewardship Smart Property Investment has been informing and educating property investors on the tactics and strategies to create wealth through property.

Trusted by over 100,000 Australians each month as the turn-to independent resource for property market insights and information, the brand supports the mantra of "for investors", by investors’, drawing on the unique position that Phillip and Smart Property Investment share, warts and all, its own journey through property.

The Smart Property Investment Show, part of the Smart Property Investment Podcast Network, is one of Australia’s most popular podcasts, forming the keystone of an integrated digital platform delivering daily property updates, live broadcasting, insights, opinion and data to property investors across the nation.

Underpinned by a content team universally recognised for their knowledge of the sector and approach for clear and concise communication, Smart Property Investment has become a central part of Australia’s property community.

About Momentum Media

Momentum Media is a leading media and market intelligence company, and the business behind Smart Property Investment, REB and RPM.

Guided by a strong sense of purpose to support our communities, Momentum Media has forged its place as one of Australia’s most influential media and professional development businesses.

We have been equipping Australia’s corporate, investor and SME sectors with market and business intelligence for over a decade.

Across an integrated business supported by digital, events, broadcast, research, print and social platforms, we are guided by the purpose: Be Better informed.

This passion for informing, educating and inspiring drives us to build more engaged communities, delivering greater leadership to the markets we connect to and forging closer relationships with our audiences.

Being at the forefront of media innovation, backed by a pioneering spirit, has been central to Momentum Media’s growth.

We’re an evolving, forward-thinking business based on a purpose that supports corporate Australia and the markets critical to our nation’s economic prosperity and security. We’re also focused on delivering exceptional value to our commercial partners.

We adapt on a daily basis to rapidly changing market places; we’re a fluid media business, unanchored to any particular technology, channel or tone of communication.

With a reach spanning nearly 2 million professionals, high-net-worth individuals and SME business owners, we’re connected to the rapidly changing preferences and attitudes of our communities – and we’re making a positive contribution for our communities to thrive.

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