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A Word of Caution - Be Careful of Poor Imitations

Edited Extract From “How To Be Mortgage Free In 4 Easy Steps”

Some institutions will argue that their Redraw accounts can do the same thing as a Foolproof Home Loan or a Home Equity Loan – they can’t.

That’s because most Redraw Accounts require you to be $2,000 ahead on your normal home loan repayments before you save any interest on the home loan, or before you can make a withdrawal.

This defeats the whole purpose of our Key Principle because you want every cent that sits in your home loan to be working for you on the daily balance.

If you don’t gain any interest from every dollar you put into your home loan, then you are doing yourself a disservice using these products.

You may find some institutions that don’t require you to maintain a minimum amount in the home loan. However, they will normally charge you a fee every time you want to withdraw any funds instead. This also defeats the purpose of the exercise, because what you may gain in interest savings, you would lose in withdrawal fees (usually between $10 - $30 per withdrawal). However, the ‘Foolproof’ Home Loan doesn’t have these restrictions.

In the bank industry, if you expect a salesperson to give you all the details about their product without leaving out crucial information (like $2,000 minimum withdrawals), and to be able to make fair and objective comparisons with competitor’s products – then you may be disappointed – although the introduction of the Consumer Credit Code on the 1st of November, 1996 is supposed to prevent this from happening.

In Western Australia there is a major bank facing a lawsuit for slander and spreading misinformation about competitor’s loan products.

So if you want the best deal for yourself, it is up to you the consumer to understand what it is you want to achieve, and then be able to ask the right questions.

It is FAAR's desire that the information provided helps you become more aware of the way the home loan industry in Australia operates, and that the Banking Advisory Service assists you to choose the most suitable home loan for your particular circumstances.

We wish you the best in achieving financial freedom by cutting years off your home loan and saving thousands of dollars in interest.

For further information or a consultation please do not hesitate to Contact FAAR

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