BLOG: How ignoring the small things can cost you $10k
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.
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.
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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INSIDE COMMERCIAL PROPERTY – WITH RETHINK INVESTING: Crunching the numbers
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Getting the most out of your mortgage broker
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Q&A session with Paul Glossop
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A broker’s perspective on current opportunities for savvy investors