There has been a recent surge in the amount of additional perks given alongside mortgage deals – no longer is it the interest rates that are designed to catch your eye, but the idea of a free television, legal fees, an iPad or iPhone, or furniture vouchers for your new home.
However, there are obvious risks involved in this. While a free television may make a particular mortgage seem like a good deal, it can be easy to get swayed into a more expensive option simply by the lure of free goodies. Furthermore, this can be unconscious and end up costing you much more long term than if you brought the television or other item yourself.
After all – the reason why banks are offering these large items as bonuses is because they help bring in more clients without having to lower their rates which would reduce their profit margins. Additionally, these “free” items aren’t free, instead they are simply added into the cost of your (excessively expensive!) mortgage. Furthermore, with the Finance Minister Bill English indicating that interest rates are set to rise later in the year, or early next year, adding cost to your borrowing.
So what to do?
The simplest option is evaluate your options separately:
- Search for your mortgage choices. Find the mortgage type that suits you, then find which lenders will offer this type to you. Never forget that even with these freebies, the mortgage rates and terms on offer are still just the starting points, and haggling can still reduce prices further!
- Write these options down on a piece of paper without the banks name or free product attached, so that you cannot be unconsciously biased toward a less financially beneficial outcome.
- Calculate which option is the cheapest for you. Using an online mortgage calculator can make this a lot easier, and more accurate.
- Choose the cheapest and most practical option. Practicality may include the terms and conditions, repayment schedule, etcetera.
- In the event that there is more than one that is close to the same pricing/practicality, only then should you consider the freebies when making your decision.
The bottom line
Freebies are great if they are just that- a freebie on top of a good deal! But take any potential freebie with a grain of salt – after all, you are paying for it so unless it’s something you really want, it may be better to look elsewhere for a cheaper deal.
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