Discover how to avoid the costly mortgage loyalty tax and save big on your home loan with our expert tips and insights.
In a dream world, showing some loyalty would net you more than just a pat on the back—think heartfelt thank you notes or even a lovely bouquet. But when it comes to your mortgage, sticking around might not be so rewarding. In fact, it can be pretty darn costly.
Welcome to the not-so-sweet world of the “loyalty tax.” This pesky little expense crops up when long-standing homeowners find themselves shelling out more in interest than the fresh faces just walking through the door. Every year, this sneaky surcharge nips at the wallets of countless Aussies. So, what’s the deal with this mortgage loyalty tax? Could you be coughing up extra cash without even realizing it? And more importantly, how can you sidestep this financial faux pas?
Think of it as the hidden cost of being a dedicated customer. Although it's not officially a tax, the so-called mortgage loyalty tax kicks in when lenders tempt newbies with lower interest rates, while the loyal crowd gets stuck with the heftier bills. This is all in the name of profit.
Let’s break it down with numbers—here’s a look at how variable interest rates stack up for new versus existing home loan customers:
Even in a stable rate climate, banks are busy wooing new customers with lower rates because, well, they’ve already got you on the hook.
The takeaway? New loan borrowers snag awesome deals, while those with older loans feel the pinch over time.
Evading this tax could be one of the biggest savers (or spenders) in your life. Consider this: Over a 30-year term on a $500K mortgage, you could save a whopping $52,557 in interest. Yeah, that's no pocket change.
It may seem harsh, but from a lender’s perspective, their strategy of offering discounts to attract new customers while maintaining profits makes sense. However, this means existing customers often pay more, especially when the market slows and competition for new clients heats up.
Here’s how to ensure you’re not overpaying:
In short, while the mortgage loyalty tax is a bummer, it’s not unbeatable. With a bit of diligence and the right guidance, you can avoid paying more than necessary and keep your finances in check.
Written By
The Craggle Team